Ishihara Chemical (TSE:4462) Will Pay A Dividend Of ¥18.00

Ishihara Chemical Co., Ltd. (TSE:4462) will pay a dividend of ¥18.00 on the 1st of July. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

Check out our latest analysis for Ishihara Chemical

Ishihara Chemical's Payment Has Solid Earnings Coverage

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, Ishihara Chemical was paying only paying out a fraction of earnings, but the payment was a massive 135% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

If the trend of the last few years continues, EPS will grow by 9.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Ishihara Chemical Doesn't Have A Long Payment History

Ishihara Chemical's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 8 years was ¥16.00 in 2016, and the most recent fiscal year payment was ¥36.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Ishihara Chemical Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Ishihara Chemical has seen EPS rising for the last five years, at 9.9% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Ishihara Chemical's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Ishihara Chemical's payments are rock solid. While Ishihara Chemical is earning enough to cover the payments, the cash flows are lacking. We don't think Ishihara Chemical is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Ishihara Chemical that you should be aware of before investing. 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.