Tokushu Tokai Paper (TSE:3708) Has Announced That It Will Be Increasing Its Dividend To ¥65.00
The board of Tokushu Tokai Paper Co., Ltd. (TSE:3708) has announced that it will be paying its dividend of ¥65.00 on the 5th of December, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.
Tokushu Tokai Paper's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Tokushu Tokai Paper 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 could expand by 3.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.
See our latest analysis for Tokushu Tokai Paper
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥130.00. This means that it has been growing its distributions at 10% per annum over that time. Tokushu Tokai Paper has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend's Growth Prospects Are Limited
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. Earnings have grown at around 3.1% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Tokushu Tokai Paper has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Tokushu Tokai Paper's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Tokushu Tokai Paper's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Tokushu Tokai Paper you should be aware of, and 1 of them is a bit unpleasant. 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.