Takara StandardLtd (TSE:7981) Is Due To Pay A Dividend Of ¥28.00

The board of Takara Standard Co.,Ltd. (TSE:7981) has announced that it will pay a dividend of ¥28.00 per share on the 27th of June. This makes the dividend yield 3.4%, which is above the industry average.

View our latest analysis for Takara StandardLtd

Takara StandardLtd's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, Takara StandardLtd is earning enough to cover the payment, but then it makes up 120% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, EPS could fall by 1.5% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 47%, which is definitely feasible to continue.

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 ¥26.00 in 2014, and the most recent fiscal year payment was ¥56.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Takara StandardLtd hasn't seen much change in its earnings per share over the last five years.

Takara StandardLtd's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Takara StandardLtd will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Takara StandardLtd 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Takara StandardLtd that investors should know about before committing capital to this stock. Is Takara StandardLtd 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.