Tsumura (TSE:4540) Has Announced That It Will Be Increasing Its Dividend To ¥68.00

Tsumura & Co.'s (TSE:4540) dividend will be increasing from last year's payment of the same period to ¥68.00 on 5th of December. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

See our latest analysis for Tsumura

Tsumura's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Tsumura was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 14.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

Tsumura Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥64.00, compared to the most recent full-year payment of ¥136.00. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.9% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Tsumura has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Tsumura is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Tsumura 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.

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