Tokyo Ohka Kogyo (TSE:4186) Is Increasing Its Dividend To ¥35.00

The board of Tokyo Ohka Kogyo Co., Ltd. (TSE:4186) has announced that it will be paying its dividend of ¥35.00 on the 8th of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.0% of the current stock price, which is about average for the industry.

We've discovered 2 warning signs about Tokyo Ohka Kogyo. View them for free.

Tokyo Ohka Kogyo's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Tokyo Ohka Kogyo was paying only paying out a fraction of earnings, but the payment was a massive 180% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 6.5% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Tokyo Ohka Kogyo

Tokyo Ohka Kogyo Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥17.33 in 2015, and the most recent fiscal year payment was ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Tokyo Ohka Kogyo has seen EPS rising for the last five years, at 35% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.

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 Tokyo Ohka Kogyo that investors should take into consideration. Is Tokyo Ohka Kogyo not quite the opportunity you were looking for? Why not check out our selection of top 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.