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

The board of Takashima & Co., Ltd. (TSE:8007) has announced that it will pay a dividend of ¥45.00 per share on the 11th of December. This takes the dividend yield to 5.4%, which shareholders will be pleased with.

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Takashima was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.

EPS is set to grow by 5.9% over the next year if recent trends continue. 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.

Check out 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 dividend has gone from an annual total of ¥15.00 in 2015 to the most recent total annual payment of ¥90.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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.

Takashima Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Takashima has been growing its earnings per share at 5.9% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

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. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Takashima (2 make us uncomfortable!) that you should be aware of before investing. 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.