TamronLtd (TSE:7740) Will Pay A Dividend Of ¥50.00

Tamron Co.,Ltd.'s (TSE:7740) investors are due to receive a payment of ¥50.00 per share on 2nd of September. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for TamronLtd

TamronLtd's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. But before making this announcement, TamronLtd's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 90% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

The next year is set to see EPS grow by 8.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥50.00 in 2014, and the most recent fiscal year payment was ¥210.00. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that TamronLtd has been growing its earnings per share at 26% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On TamronLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think TamronLtd will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments TamronLtd has been making. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for TamronLtd that investors should take into consideration. 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.

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