Tachikawa (TSE:7989) Is Due To Pay A Dividend Of ¥17.00

Tachikawa Corporation's (TSE:7989) investors are due to receive a payment of ¥17.00 per share on 2nd of September. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

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Tachikawa's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Tachikawa's dividend was only 25% of earnings, however it was paying out 241% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

EPS is set to fall by 0.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 40%, 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 Tachikawa

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥10.00 total annually to ¥55.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Tachikawa's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Tachikawa's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Tachikawa (of which 1 is potentially serious!) you should know about. Is Tachikawa not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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