Tachikawa's (TSE:7989) Dividend Will Be ¥17.00

The board of Tachikawa Corporation (TSE:7989) has announced that it will pay a dividend of ¥17.00 per share on the 2nd of September. This takes the dividend yield to 3.7%, which shareholders will be pleased with.

Our free stock report includes 2 warning signs investors should be aware of before investing in Tachikawa. Read for free now.

Tachikawa's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Tachikawa was paying only paying out a fraction of earnings, but the payment was a massive 241% of 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.

If the trend of the last few years continues, EPS will grow by 0.05% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

View our latest analysis for Tachikawa

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 ¥10.00 in 2015, and the most recent fiscal year payment was ¥55.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Tachikawa's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Tachikawa is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Tachikawa has 2 warning signs (and 1 which shouldn't be ignored) we think 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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