Titan Kogyo (TSE:4098) Is Due To Pay A Dividend Of ¥10.00

Titan Kogyo, Ltd. (TSE:4098) has announced that it will pay a dividend of ¥10.00 per share on the 27th of June. This payment means the dividend yield will be 1.2%, which is below the average for the industry.

Check out our latest analysis for Titan Kogyo

Titan Kogyo's Distributions May Be Difficult To Sustain

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though Titan Kogyo isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS has fallen by an average of 67.8% in the past, so this could continue over the next year. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

Titan Kogyo's Dividend Has Lacked Consistency

Looking back, Titan Kogyo's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥10.00. This works out to a decline of approximately 67% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Titan Kogyo's earnings per share has shrunk at 68% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Titan Kogyo has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.