Tama Home (TSE:1419) Is Increasing Its Dividend To ¥195.00

Tama Home Co., Ltd.'s (TSE:1419) dividend will be increasing from last year's payment of the same period to ¥195.00 on 29th of August. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.

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Tama Home's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Tama Home's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 7.1% 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 reach 190%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for Tama Home

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥195.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Tama Home 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.

Dividend Growth Is Doubtful

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. Over the past five years, it looks as though Tama Home's EPS has declined at around 7.1% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Tama Home's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Tama Home 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Tama Home has 2 warning signs (and 1 which is concerning) we think you should know about. 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.