Tosoh (TSE:4042) Is Paying Out 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. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.

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Tosoh's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Tosoh was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. 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 13.8%. If the dividend continues on this path, the payout ratio could be 65% 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 an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥12.00 total annually to ¥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.

Tosoh May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Tosoh has only grown its earnings per share at 2.1% per annum over the past five years. The company has been growing at a pretty soft 2.1% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

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. While Tosoh is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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.