Toyo Seikan Group Holdings' (TSE:5901) Dividend Will Be Increased To ¥57.00

The board of Toyo Seikan Group Holdings, Ltd. (TSE:5901) has announced that it will be paying its dividend of ¥57.00 on the 2nd of December, an increased payment from last year's comparable dividend. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.

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 Toyo Seikan Group Holdings' stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Toyo Seikan Group Holdings' Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Toyo Seikan Group Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 32.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

See our latest analysis for Toyo Seikan Group Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥114.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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. Toyo Seikan Group Holdings has impressed us by growing EPS at 32% per year over the past five years. Toyo Seikan Group Holdings is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Toyo Seikan Group Holdings' Dividend

Overall, a dividend increase is always good, and we think that Toyo Seikan Group Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Toyo Seikan Group Holdings that investors should know about before committing capital to this stock. 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.