Chugai Pharmaceutical's (TSE:4519) Dividend Will Be ¥125.00

The board of Chugai Pharmaceutical Co., Ltd. (TSE:4519) has announced that it will pay a dividend on the 30th of March, with investors receiving ¥125.00 per share. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

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Estimates Indicate Chugai Pharmaceutical's Could Struggle to Maintain Dividend Payments In The Future

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Chugai Pharmaceutical's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next 12 months is set to see EPS grow by 8.6%. If the dividend continues on its recent course, the payout ratio in 12 months could be 114%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Chugai Pharmaceutical

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥17.33 total annually to ¥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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Chugai Pharmaceutical has been growing its earnings per share at 16% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Chugai Pharmaceutical that investors should know about before committing capital to this stock. 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.