Takemoto Yohki (TSE:4248) Has Announced A Dividend Of ¥18.00

The board of Takemoto Yohki Co., Ltd. (TSE:4248) has announced that it will pay a dividend on the 2nd of September, with investors receiving ¥18.00 per share. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Takemoto Yohki

Takemoto Yohki Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 137% of what it was earning and 80% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

If the company can't turn things around, EPS could fall by 22.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 201%, which could put the dividend under pressure if earnings don't start to improve.

Takemoto Yohki's Dividend Has Lacked Consistency

It's comforting to see that Takemoto Yohki has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ¥12.00 in 2015 to the most recent total annual payment of ¥36.00. This means that it has been growing its distributions at 13% 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 Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Takemoto Yohki's earnings per share has shrunk at 23% 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.

Takemoto Yohki's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

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 example, we've identified 3 warning signs for Takemoto Yohki (1 is potentially serious!) 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.