Tohto Suisan (TSE:8038) Has Announced A Dividend Of ¥135.00

Tohto Suisan Co., Ltd. (TSE:8038) has announced that it will pay a dividend of ¥135.00 per share on the 24th of June. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Tohto Suisan

Tohto Suisan's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Tohto Suisan's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 16.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Tohto Suisan 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 ¥30.00 in 2014 to the most recent total annual payment of ¥135.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Tohto Suisan has seen EPS rising for the last five years, at 16% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Tohto Suisan's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tohto Suisan's payments, as there could be some issues with sustaining them into the future. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Tohto Suisan that you should be aware of before investing. Is Tohto Suisan 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.