Chofu Seisakusho's (TSE:5946) Dividend Will Be ¥23.00

The board of Chofu Seisakusho Co., Ltd. (TSE:5946) has announced that it will pay a dividend on the 21st of August, with investors receiving ¥23.00 per share. This makes the dividend yield 2.0%, which is above the industry average.

Check out our latest analysis for Chofu Seisakusho

Chofu Seisakusho's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Chofu Seisakusho's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 6.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

Chofu Seisakusho Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥30.00 in 2014 to the most recent total annual payment of ¥46.00. This means that it has been growing its distributions at 4.4% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Chofu Seisakusho has seen EPS rising for the last five years, at 6.9% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Chofu Seisakusho's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Chofu Seisakusho 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.