Tadano (TSE:6395) Will Pay A Dividend Of ¥10.00

Tadano Ltd.'s (TSE:6395) investors are due to receive a payment of ¥10.00 per share on 5th of September. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

See our latest analysis for Tadano

Tadano's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Tadano's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 52.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥16.00 in 2014, and the most recent fiscal year payment was ¥23.00. This means that it has been growing its distributions at 3.7% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Tadano has seen earnings per share falling at 4.9% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Tadano's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Tadano's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Tadano that investors should take into consideration. Is Tadano not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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