Chugai Pharmaceutical (TSE:4519) Will Pay A Dividend Of ¥125.00

Chugai Pharmaceutical Co., Ltd. (TSE:4519) has announced that it will pay a dividend of ¥125.00 per share on the 30th of March. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.

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Chugai Pharmaceutical's Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Chugai Pharmaceutical's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next 12 months is set to see EPS grow by 8.0%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 114%, which probably can't continue without putting some pressure on the balance sheet.

View our latest analysis for Chugai Pharmaceutical

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥17.33, compared to the most recent full-year payment of ¥100.00. This means that it has been growing its distributions at 19% per annum over that time. Chugai Pharmaceutical has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Chugai Pharmaceutical has grown earnings per share at 16% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Chugai Pharmaceutical's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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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.