Takemoto Yohki (TSE:4248) Will Pay A Dividend Of ¥18.00

The board of Takemoto Yohki Co., Ltd. (TSE:4248) has announced that it will pay a dividend of ¥18.00 per share on the 27th of March. This makes the dividend yield 4.4%, which will augment investor returns quite nicely.

View our latest analysis for Takemoto Yohki

Takemoto Yohki Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Takemoto Yohki's dividend made up quite a large proportion of earnings but only 47% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, EPS could fall by 16.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 127%, which could put the dividend under pressure if earnings don't start to improve.

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 dividend has gone from ¥12.00 total annually to ¥36.00. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. Over the past five years, it looks as though Takemoto Yohki's EPS has declined at around 16% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Takemoto Yohki's Dividend

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Takemoto Yohki (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.