Tosoh (TSE:4042) Is Due To Pay 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 2nd of June. This will take the dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Tosoh

Tosoh's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Tosoh is earning enough to cover the payment, but then it makes up 319% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 5.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Tosoh Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Tosoh hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Tosoh's Dividend

Overall, we always like to see the dividend being raised, but we don't think Tosoh will make a great income stock. While Tosoh is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Tosoh that investors need to be conscious of moving forward. 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.