Tayca (TSE:4027) Is Due To Pay A Dividend Of ¥18.00

Tayca Corporation (TSE:4027) has announced that it will pay a dividend of ¥18.00 per share on the 4th of December. This means the dividend yield will be fairly typical at 2.3%.

See our latest analysis for Tayca

Tayca's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Tayca's dividend made up quite a large proportion of earnings but only 64% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, EPS could fall by 13.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 60%, which we consider to be quite comfortable, even though the current levels are slightly more elevated.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥16.00 in 2014, and the most recent fiscal year payment was ¥38.00. This means that it has been growing its distributions at 9.0% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tayca's EPS has fallen by approximately 14% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tayca's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Tayca you should be aware of, and 1 of them doesn't sit too well with us. Is Tayca not quite the opportunity you were looking for? Why not check out our selection of top 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.

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