Toho Holdings' (TSE:8129) Shareholders Will Receive A Bigger Dividend Than Last Year

Toho Holdings Co., Ltd. (TSE:8129) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥45.00. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

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Toho Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Toho Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 2.3%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Toho Holdings

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 ¥24.00 in 2015, and the most recent fiscal year payment was ¥90.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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 6.4% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Toho Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On Toho Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Toho Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Toho Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Toho Holdings that you should be aware of before investing. Is Toho Holdings 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.