Tadano (TSE:6395) Is Paying Out A Larger Dividend Than Last Year

The board of Tadano Ltd. (TSE:6395) has announced that it will be paying its dividend of ¥18.00 on the 5th of September, an increased payment from last year's comparable dividend. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

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Tadano's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Tadano was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 18.0% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Tadano

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥36.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Tadano's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Tadano's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Tadano is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for Tadano that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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