Toho Holdings (TSE:8129) Is Paying Out A Larger Dividend Than Last Year

Toho Holdings Co., Ltd.'s (TSE:8129) dividend will be increasing from last year's payment of the same period to ¥22.00 on 10th of June. Even though the dividend went up, the yield is still quite low at only 1.1%.

View our latest analysis for Toho Holdings

Toho Holdings' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Toho Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 28.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥36.00. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Toho Holdings might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

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. It's encouraging to see that Toho Holdings has been growing its earnings per share at 6.0% a year over the past five years. 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.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Just as an example, we've come across 2 warning signs for Toho Holdings you should be aware of, and 1 of them can't be ignored. 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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