Tokyo Rope Mfg (TSE:5981) Is Increasing Its Dividend To ¥40.00

Tokyo Rope Mfg. Co., Ltd. (TSE:5981) will increase its dividend from last year's comparable payment on the 12th of June to ¥40.00. Despite this raise, the dividend yield of 2.6% is only a modest boost to shareholder returns.

See our latest analysis for Tokyo Rope Mfg

Tokyo Rope Mfg's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Tokyo Rope Mfg's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 0.09% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 15%, which is comfortable for the company to continue in the future.

Tokyo Rope Mfg's Dividend Has Lacked Consistency

It's comforting to see that Tokyo Rope Mfg has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The payments haven't really changed that much since 9 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Tokyo Rope Mfg has been growing its earnings per share at 30% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Tokyo Rope Mfg Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Tokyo Rope Mfg (2 are significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.