Toyobo (TSE:3101) Is Paying Out A Dividend Of ¥40.00

Toyobo Co., Ltd. (TSE:3101) will pay a dividend of ¥40.00 on the 1st of July. The dividend yield will be 3.7% based on this payment which is still above the industry average.

See our latest analysis for Toyobo

Toyobo Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even in the absence of profits, Toyobo is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Over the next year, EPS is forecast to expand by 49.1%. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Toyobo Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥35.00, compared to the most recent full-year payment of ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.3% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, Toyobo's earnings per share has shrunk at approximately 7.9% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Toyobo that you should be aware of before investing. Is Toyobo 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.