Taiyo Holdings (TSE:4626) Is Due To Pay A Dividend Of ¥145.00

Taiyo Holdings Co., Ltd.'s (TSE:4626) investors are due to receive a payment of ¥145.00 per share on 2nd of December. This takes the dividend yield to 4.4%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Taiyo Holdings' stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Estimates Indicate Taiyo Holdings' Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 16.8% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 138%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Taiyo Holdings

Taiyo Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥45.00 in 2015, and the most recent fiscal year payment was ¥290.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Taiyo Holdings has impressed us by growing EPS at 24% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Taiyo Holdings (1 is potentially serious!) that you should be aware of before investing. Is Taiyo Holdings 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.