Toray Industries (TSE:3402) Is Paying Out A Larger Dividend Than Last Year

Toray Industries, Inc. (TSE:3402) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥10.00. Based on this payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

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Toray Industries' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Toray Industries' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 13.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

See our latest analysis for Toray Industries

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥20.00. This implies that the company grew its distributions at a yearly rate of about 5.2% 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. Toray Industries might have put its house in order since then, but we remain cautious.

Toray Industries Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Toray Industries has seen EPS rising for the last five years, at 7.5% per annum. Toray Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Toray Industries' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Toray Industries 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.