Tsukishima Holdings (TSE:6332) Is Due To Pay A Dividend Of ¥21.00

Tsukishima Holdings Co., Ltd. (TSE:6332) has announced that it will pay a dividend of ¥21.00 per share on the 7th of June. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Tsukishima Holdings

Tsukishima Holdings' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Tsukishima Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 2.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Tsukishima Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥15.00 in 2014 to the most recent total annual payment of ¥42.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. Growth of 2.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Tsukishima Holdings' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Tsukishima Holdings is earning enough to cover the payments, the cash flows are lacking. We don't think Tsukishima Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Tsukishima Holdings that investors should take into consideration. Is Tsukishima Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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