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

Takemoto Yohki Co., Ltd. (TSE:4248) will pay a dividend of ¥18.00 on the 27th of March. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

View our latest analysis for Takemoto Yohki

Takemoto Yohki's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Takemoto Yohki's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 11.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 93%, which is definitely on the higher side.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥36.00. 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 Potential Is Shaky

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. Earnings per share has been sinking by 11% over the last 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Takemoto Yohki's payments, as there could be some issues with sustaining them into the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Takemoto Yohki has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Takemoto Yohki 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.