Toagosei (TSE:4045) Will Pay A Dividend Of ¥29.00

The board of Toagosei Co., Ltd. (TSE:4045) has announced that it will pay a dividend of ¥29.00 per share on the 6th of September. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Toagosei

Toagosei's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Toagosei was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 26.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

Toagosei Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥20.00 total annually to ¥58.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Toagosei 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, Toagosei has only grown its earnings per share at 3.0% per annum over the past five years. Growth of 3.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

We Really Like Toagosei's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Toagosei stock. 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.

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