Chugai Pharmaceutical (TSE:4519) Is Paying Out A Larger Dividend Than Last Year

The board of Chugai Pharmaceutical Co., Ltd. (TSE:4519) has announced that it will be paying its dividend of ¥125.00 on the 29th of August, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.4%.

Our free stock report includes 1 warning sign investors should be aware of before investing in Chugai Pharmaceutical. Read for free now.

Chugai Pharmaceutical's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Chugai Pharmaceutical was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to grow by 6.7% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for Chugai Pharmaceutical

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥100.00. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. We are encouraged to see that Chugai Pharmaceutical has grown earnings per share at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Chugai Pharmaceutical Looks Like A Great Dividend Stock

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. Taking the debate a bit further, we've identified 1 warning sign for Chugai Pharmaceutical that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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