Toyo Denki Seizo K.K's (TSE:6505) Upcoming Dividend Will Be Larger Than Last Year's

The board of Toyo Denki Seizo K.K. (TSE:6505) has announced that it will be paying its dividend of ¥44.00 on the 29th of August, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.9%, providing a nice boost to shareholder returns.

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Toyo Denki Seizo K.K's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 2.3%. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Toyo Denki Seizo K.K

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 annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥40.00. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

We Could See Toyo Denki Seizo K.K's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Toyo Denki Seizo K.K has been growing its earnings per share at 7.3% a 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

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Toyo Denki Seizo K.K 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Toyo Denki Seizo K.K that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.