Chofu Seisakusho (TSE:5946) Has Announced A Dividend Of ¥23.00

The board of Chofu Seisakusho Co., Ltd. (TSE:5946) has announced that it will pay a dividend of ¥23.00 per share on the 20th of August. Based on this payment, the dividend yield on the company's stock will be 2.5%, which is an attractive boost to shareholder returns.

We've discovered 1 warning sign about Chofu Seisakusho. View them for free.

Chofu Seisakusho's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Chofu Seisakusho is earning enough to cover the payment, but then it makes up 145% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share could rise by 14.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Chofu Seisakusho

Chofu Seisakusho Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥32.00 total annually to ¥46.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Chofu Seisakusho has been growing its earnings per share at 14% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Chofu Seisakusho's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Chofu Seisakusho 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. For example, we've picked out 1 warning sign for Chofu Seisakusho that investors should know about before committing capital to this stock. 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.