Tokushu Tokai Paper (TSE:3708) Is Due To Pay A Dividend Of ¥60.00

The board of Tokushu Tokai Paper Co., Ltd. (TSE:3708) has announced that it will pay a dividend of ¥60.00 per share on the 5th of December. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Tokushu Tokai Paper

Tokushu Tokai Paper's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Tokushu Tokai Paper's 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 could rise by 5.8% over the next year if the trend from the last few years continues. 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.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥120.00. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Tokushu Tokai Paper Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tokushu Tokai Paper has seen EPS rising for the last five years, at 5.8% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Tokushu Tokai Paper's prospects of growing its dividend payments in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Tokushu Tokai Paper (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.