Toyo Denki Seizo K.K (TSE:6505) Is Paying Out A Larger Dividend Than Last Year

Toyo Denki Seizo K.K.'s (TSE:6505) dividend will be increasing from last year's payment of the same period to ¥40.00 on 29th of August. This makes the dividend yield 3.1%, which is above the industry average.

View our latest analysis for Toyo Denki Seizo K.K

Toyo Denki Seizo K.K's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Toyo Denki Seizo K.K was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 6.4% 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 24% by next year, which we think can be pretty sustainable going forward.

Toyo Denki Seizo K.K Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥30.00 in 2015 to the most recent total annual payment of ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Toyo Denki Seizo K.K Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Toyo Denki Seizo K.K has impressed us by growing EPS at 6.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Toyo Denki Seizo K.K's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Toyo Denki Seizo K.K's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Toyo Denki Seizo K.K has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.