Tomita (TSE:8147) Will Pay A Larger Dividend Than Last Year At ¥19.00

Tomita Co., Ltd. (TSE:8147) will increase its dividend on the 1st of July to ¥19.00, which is 5.6% higher than last year's payment from the same period of ¥18.00. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Tomita

Tomita's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Tomita was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 5.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥9.00 total annually to ¥18.00. This implies that the company grew its distributions at a yearly rate of about 7.2% 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. Tomita might have put its house in order since then, but we remain cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Tomita's earnings per share has shrunk at approximately 5.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Tomita's Dividend

Overall, we always like to see the dividend being raised, but we don't think Tomita will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Tomita (of which 1 is a bit unpleasant!) you should know about. 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.