Toho Acetylene (TSE:4093) Is Due To Pay A Dividend Of ¥5.00

The board of Toho Acetylene Co., Ltd. (TSE:4093) has announced that it will pay a dividend on the 15th of December, with investors receiving ¥5.00 per share. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

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Toho Acetylene's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Toho Acetylene's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 7.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Toho Acetylene

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥14.00. The dividend has shrunk at around 3.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See Toho Acetylene's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Toho Acetylene has impressed us by growing EPS at 7.0% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, a consistent dividend is a good thing, and we think that Toho Acetylene has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. As an example, we've identified 2 warning signs for Toho Acetylene that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.