Ishihara Chemical (TSE:4462) Will Pay A Larger Dividend Than Last Year At ¥22.00

The board of Ishihara Chemical Co., Ltd. (TSE:4462) has announced that it will be paying its dividend of ¥22.00 on the 2nd of December, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.3%.

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Ishihara Chemical's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Ishihara Chemical's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 22.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Ishihara Chemical

Ishihara Chemical Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the dividend has gone from ¥16.00 total annually to ¥44.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Ishihara Chemical has impressed us by growing EPS at 23% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Ishihara Chemical Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an 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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Ishihara Chemical stock. Is Ishihara Chemical 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.