Takashima (TSE:8007) Is Due To Pay A Dividend Of ¥45.00

Takashima & Co., Ltd.'s (TSE:8007) investors are due to receive a payment of ¥45.00 per share on 11th of December. This makes the dividend yield 5.8%, which is above the industry average.

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Estimates Indicate Takashima's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

Over the next year, EPS could expand by 5.9% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, we think the payout ratio could reach 108%, which probably can't continue without starting to put some pressure on the balance sheet.

View our latest analysis for Takashima

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Takashima has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Takashima's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Takashima has impressed us by growing EPS at 5.9% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Takashima's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Takashima's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Takashima has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about. Is Takashima 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.