Takara StandardLtd (TSE:7981) Is Paying Out A Larger Dividend Than Last Year

Takara Standard Co.,Ltd. (TSE:7981) will increase its dividend from last year's comparable payment on the 2nd of December to ¥28.00. This takes the dividend yield to 3.5%, which shareholders will be pleased with.

See our latest analysis for Takara StandardLtd

Takara StandardLtd's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Takara StandardLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 3.5% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥26.00 in 2014 to the most recent total annual payment of ¥56.00. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Takara StandardLtd might have put its house in order since then, but we remain cautious.

Takara StandardLtd May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 3.5% per year. While growth may be thin on the ground, Takara StandardLtd could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Takara StandardLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Takara StandardLtd's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. 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.