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

The board of Takeda Pharmaceutical Company Limited (TSE:4502) has announced that it will pay a dividend on the 27th of June, with investors receiving ¥98.00 per share. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.

See our latest analysis for Takeda Pharmaceutical

Takeda Pharmaceutical's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 104% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 58%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 7.7% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 100%, which is a bit high and could start applying pressure to the balance sheet.

Takeda Pharmaceutical Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥180.00 total annually to ¥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.

Takeda Pharmaceutical Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Takeda Pharmaceutical has seen EPS rising for the last five years, at 24% per annum. Although earnings per share is up nicely Takeda Pharmaceutical is paying out 104% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On Takeda Pharmaceutical's Dividend

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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Takeda Pharmaceutical (1 is concerning!) 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.