Tokyo Century (TSE:8439) Will Pay A Dividend Of ¥29.00

The board of Tokyo Century Corporation (TSE:8439) has announced that it will pay a dividend of ¥29.00 per share on the 25th of June. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

Check out our latest analysis for Tokyo Century

Tokyo Century's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tokyo Century'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 is forecast to expand by 6.1%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Tokyo Century Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥58.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Tokyo Century has been growing its earnings per share at 7.8% a year over the past five years. Tokyo Century definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Tokyo Century will make a great income stock. While Tokyo Century is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Tokyo Century (1 shouldn't be ignored!) that you should be aware of before investing. 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.