T&D Holdings' (TSE:8795) Shareholders Will Receive A Bigger Dividend Than Last Year

T&D Holdings, Inc. (TSE:8795) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of December to ¥62.00. Based on this payment, the dividend yield for the company will be 3.5%, which is fairly typical for the industry.

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T&D Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. T&D Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 11.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for T&D Holdings

T&D Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥25.00 in 2015, and the most recent fiscal year payment was ¥124.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. 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. T&D Holdings has seen EPS rising for the last five years, at 18% 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 T&D Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think T&D Holdings' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for T&D Holdings (1 shouldn't be ignored!) that you should be aware of before investing. Is T&D 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.