Tokyo Rope Mfg (TSE:5981) Has Announced That It Will Be Increasing Its Dividend To ¥60.00

Tokyo Rope Mfg. Co., Ltd. (TSE:5981) will increase its dividend from last year's comparable payment on the 12th of June to ¥60.00. This takes the dividend yield to 4.7%, which shareholders will be pleased with.

View our latest analysis for Tokyo Rope Mfg

Tokyo Rope Mfg's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Tokyo Rope Mfg's dividend was only 33% of earnings, however it was paying out 97% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 19.4%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

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. The dividend has gone from an annual total of ¥40.00 in 2015 to the most recent total annual payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Tokyo Rope Mfg has been growing its earnings per share at 67% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Tokyo Rope Mfg's Dividend

Overall, we always like to see the dividend being raised, but we don't think Tokyo Rope Mfg will make a great income stock. While Tokyo Rope Mfg is earning enough to cover the payments, the cash flows are lacking. We don't think Tokyo Rope Mfg is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Tokyo Rope Mfg (1 is concerning!) 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.