Chofu Seisakusho (TSE:5946) Will Pay A Dividend Of ¥23.00

Chofu Seisakusho Co., Ltd. (TSE:5946) will pay a dividend of ¥23.00 on the 24th of March. This makes the dividend yield 2.4%, which will augment investor returns quite nicely.

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Chofu Seisakusho's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Chofu Seisakusho's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 2.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 72%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Chofu Seisakusho

Chofu Seisakusho Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥32.00 in 2015 to the most recent total annual payment of ¥46.00. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Chofu Seisakusho has seen earnings per share falling at 2.3% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Chofu Seisakusho's Dividend

Overall, we think Chofu Seisakusho is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. Is Chofu Seisakusho not quite the opportunity you were looking for? Why not check out our selection of top 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.