Itoki (TSE:7972) Is Increasing Its Dividend To ¥68.00

The board of Itoki Corporation (TSE:7972) has announced that it will be paying its dividend of ¥68.00 on the 27th of March, an increased payment from last year's comparable dividend. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

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Itoki's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Itoki was paying a whopping 6,719% as a dividend, but this only made up 30% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 9.1% over the next year. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Itoki

Itoki Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥13.00 total annually to ¥68.00. This means that it has been growing its distributions at 18% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Itoki has seen EPS rising for the last five years, at 43% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Itoki is earning enough to cover the payments, the cash flows are lacking. We don't think Itoki is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Itoki that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.