Tokyo Rope Mfg (TSE:5981) Is Paying Out A Larger Dividend Than Last Year

Tokyo Rope Mfg. Co., Ltd.'s (TSE:5981) dividend will be increasing from last year's payment of the same period to ¥40.00 on 12th of June. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

See our latest analysis for Tokyo Rope Mfg

Tokyo Rope Mfg's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Tokyo Rope Mfg was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 0.09% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 15%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Tokyo Rope Mfg's Dividend Has Lacked Consistency

Tokyo Rope Mfg has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. 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. We are encouraged to see that Tokyo Rope Mfg has grown earnings per share at 30% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Tokyo Rope Mfg's Dividend

Overall, a dividend increase is always good, and we think that Tokyo Rope Mfg is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend 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. Just as an example, we've come across 3 warning signs for Tokyo Rope Mfg you should be aware of, and 2 of them are a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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