Toagosei (TSE:4045) Has Announced A Dividend Of ¥30.00

The board of Toagosei Co., Ltd. (TSE:4045) has announced that it will pay a dividend of ¥30.00 per share on the 31st of March. However, the dividend yield of 4.0% is still a decent boost to shareholder returns.

Check out our latest analysis for Toagosei

Toagosei'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. Based on the last dividend, Toagosei is earning enough to cover the payment, but then it makes up 112% 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.

The next year is set to see EPS grow by 4.7%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Toagosei Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Toagosei Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Toagosei has seen EPS rising for the last five years, at 7.1% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Toagosei that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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