TOLI's (TSE:7971) Shareholders Will Receive A Bigger Dividend Than Last Year

TOLI Corporation (TSE:7971) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of June to ¥22.00. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

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TOLI's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, TOLI was paying a whopping 2,625% as a dividend, but this only made up 24% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS could expand by 24.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for TOLI

TOLI Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥7.00, compared to the most recent full-year payment of ¥32.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. TOLI has seen EPS rising for the last five years, at 24% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On TOLI's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for TOLI that you should be aware of before investing. Is TOLI 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.