Tosoh (TSE:4042) Has Announced A Dividend Of ¥50.00

The board of Tosoh Corporation (TSE:4042) has announced that it will pay a dividend of ¥50.00 per share on the 4th of December. Based on this payment, the dividend yield on the company's stock will be 4.3%, which is an attractive boost to shareholder returns.

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Tosoh's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Tosoh was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 87% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 13.0%. If the dividend continues on this path, the payout ratio could be 66% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Tosoh

Tosoh Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 2.0% per year. Growth of 2.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Tosoh's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tosoh's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Tosoh has been making. 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 8 analysts we track are forecasting for Tosoh for free with public analyst estimates for the company. Is Tosoh 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.