Taoka Chemical Company (TSE:4113) Has Announced A Dividend Of ¥9.00

Taoka Chemical Company, Limited (TSE:4113) has announced that it will pay a dividend of ¥9.00 per share on the 4th of December. Based on this payment, the dividend yield will be 2.0%, which is fairly typical for the industry.

Check out our latest analysis for Taoka Chemical Company

Taoka Chemical Company's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Taoka Chemical Company's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 16.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥6.00 total annually to ¥18.00. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Is Doubtful

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. Over the past five years, it looks as though Taoka Chemical Company's EPS has declined at around 5.7% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Taoka Chemical Company's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Taoka Chemical Company that investors should take into consideration. 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.