Chugai Pharmaceutical's (TSE:4519) Dividend Will Be ¥41.00

Chugai Pharmaceutical Co., Ltd.'s (TSE:4519) investors are due to receive a payment of ¥41.00 per share on 31st of March. This takes the annual payment to 1.1% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Chugai Pharmaceutical

Chugai Pharmaceutical's Projected Earnings Seem Likely To Cover Future Distributions

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. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 5.9%. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥15.33 in 2014 to the most recent total annual payment of ¥82.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year 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. Chugai Pharmaceutical has impressed us by growing EPS at 23% per 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, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Chugai Pharmaceutical analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.