Tokuyama (TSE:4043) Is Increasing Its Dividend To ¥60.00

Tokuyama Corporation's (TSE:4043) dividend will be increasing from last year's payment of the same period to ¥60.00 on 2nd of December. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

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Tokuyama's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Tokuyama was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 14.6%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Tokuyama

Tokuyama Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of ¥20.00 in 2017 to the most recent total annual payment of ¥120.00. This means that it has been growing its distributions at 25% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Tokuyama May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Tokuyama has only grown its earnings per share at 2.5% per annum over the past five years. While EPS growth is quite low, Tokuyama has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 3 analysts we track are forecasting for Tokuyama for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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