Tokushu Tokai Paper's (TSE:3708) Dividend Will Be ¥60.00

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 takes the dividend yield to 3.2%, which shareholders will be pleased with.

See our latest analysis for Tokushu Tokai Paper

Tokushu Tokai Paper's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Tokushu Tokai Paper was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 5.6% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once 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 means that it has been growing its distributions at 9.1% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Tokushu Tokai Paper's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Tokushu Tokai Paper has grown earnings per share at 5.6% per year over the past five years. 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

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Tokushu Tokai Paper (of which 1 is potentially serious!) you should know about. 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.

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