Takeda Pharmaceutical (TSE:4502) Has Announced A Dividend Of ¥100.00

Takeda Pharmaceutical Company Limited (TSE:4502) has announced that it will pay a dividend of ¥100.00 per share on the 26th of June. This takes the dividend yield to 4.5%, which shareholders will be pleased with.

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Takeda Pharmaceutical's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Takeda Pharmaceutical's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 30.9%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for Takeda Pharmaceutical

Takeda Pharmaceutical Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥180.00 in 2015, and the most recent fiscal year payment was ¥200.00. This implies that the company grew its distributions at a yearly rate of about 1.1% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Takeda Pharmaceutical's EPS has declined at around 10% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 4 warning signs for Takeda Pharmaceutical that investors should take into consideration. 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.