Tadano (TSE:6395) Is Due To Pay A Dividend Of ¥10.00

Tadano Ltd. (TSE:6395) will pay a dividend of ¥10.00 on the 5th of September. The payment will take the dividend yield to 1.9%, which is in line with the average for the industry.

Check out our latest analysis for Tadano

Tadano's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Tadano's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 69.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥12.00 in 2014 to the most recent total annual payment of ¥23.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Tadano might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Tadano's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Tadano has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Tadano's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Tadano that investors need to be conscious of moving forward. Is Tadano not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.