Takara Holdings (TSE:2531) Is Increasing Its Dividend To ¥31.00

Takara Holdings Inc. (TSE:2531) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of June to ¥31.00. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.

See our latest analysis for Takara Holdings

Takara Holdings' Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Takara Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 11.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥9.00 in 2015 to the most recent total annual payment of ¥31.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. 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 Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Takara Holdings has grown earnings per share at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Takara Holdings' prospects of growing its dividend payments in the future.

We Really Like Takara Holdings' Dividend

Overall, a dividend increase is always good, and we think that Takara Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Takara Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.