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 dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

See our latest analysis for Takeda Pharmaceutical

Takeda Pharmaceutical's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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.

The next 12 months is set to see EPS grow by 10.8%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 97% over the next year.

Takeda Pharmaceutical Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥180.00, compared to the most recent full-year payment of ¥196.00. Dividend payments have been growing, but very slowly over the period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Takeda Pharmaceutical has seen EPS rising for the last five years, at 24% per annum. While EPS is growing rapidly, Takeda Pharmaceutical paid out a very high 104% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Takeda Pharmaceutical has 3 warning signs (and 1 which is significant) we think you should know about. 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.