Chugai Pharmaceutical (TSE:4519) Is Due To Pay A Dividend Of ¥41.00

The board of Chugai Pharmaceutical Co., Ltd. (TSE:4519) has announced that it will pay a dividend on the 31st of March, with investors receiving ¥41.00 per share. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

View our latest analysis for Chugai Pharmaceutical

Chugai Pharmaceutical's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Chugai Pharmaceutical's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 4.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥15.33 total annually to ¥82.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Chugai Pharmaceutical has been growing its earnings per share at 26% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Chugai Pharmaceutical's Dividend

Overall, a dividend increase is always good, and we think that Chugai Pharmaceutical is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 14 analysts we track are forecasting for Chugai Pharmaceutical for free with public analyst estimates for the company. Is Chugai Pharmaceutical not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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