Takeda Pharmaceutical's (TSE:4502) Dividend Will Be ¥98.00

Takeda Pharmaceutical Company Limited (TSE:4502) will pay a dividend of ¥98.00 on the 27th of June. This will take the annual payment to 4.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Takeda Pharmaceutical

Takeda Pharmaceutical's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Takeda Pharmaceutical's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

The next 12 months is set to see EPS grow by 12.4%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 96%, which probably can't continue without putting some pressure on the balance sheet.

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 2014, and the most recent fiscal year payment was ¥196.00. Dividend payments have grown at less than 1% a year over this period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Takeda Pharmaceutical has been growing its earnings per share at 24% a year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Takeda Pharmaceutical will make a great income stock. 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 probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Takeda Pharmaceutical (of which 1 shouldn't be ignored!) you should know about. Is Takeda Pharmaceutical 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.