Taki Chemical's (TSE:4025) Shareholders Will Receive A Bigger Dividend Than Last Year

Taki Chemical Co., Ltd. (TSE:4025) will increase its dividend from last year's comparable payment on the 28th of March to ¥55.00. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

See our latest analysis for Taki Chemical

Taki Chemical's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Taki Chemical'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.

Over the next year, EPS could expand by 7.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

Taki Chemical 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. The dividend has gone from an annual total of ¥32.50 in 2014 to the most recent total annual payment of ¥55.00. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Taki Chemical has been growing its earnings per share at 7.4% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Taki Chemical Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Taki Chemical is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Taki Chemical stock. 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.