Toyo Seikan Group Holdings' (TSE:5901) Upcoming Dividend Will Be Larger Than Last Year's

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 will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

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 34% 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' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Toyo Seikan Group Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 32.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 53% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Toyo Seikan Group Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥14.00 in 2015, and the most recent fiscal year payment was ¥114.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. 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

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. We are encouraged to see that Toyo Seikan Group Holdings has grown earnings per share 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.

Toyo Seikan Group Holdings Looks Like A Great Dividend Stock

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. 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 Toyo Seikan Group Holdings that you should be aware of before investing. Is Toyo Seikan Group 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.