Tsumura (TSE:4540) Is Increasing Its Dividend To ¥68.00

Tsumura & Co. (TSE:4540) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of December to ¥68.00. This makes the dividend yield 3.0%, which is above the industry average.

See our latest analysis for Tsumura

Tsumura's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Tsumura was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 8.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

Tsumura Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥64.00 in 2014 to the most recent total annual payment of ¥136.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.8% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Tsumura Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Tsumura has been growing its earnings per share at 9.6% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Tsumura's prospects of growing its dividend payments in the future.

Our Thoughts On Tsumura's Dividend

Overall, we always like to see the dividend being raised, but we don't think Tsumura will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 1 warning sign for Tsumura that you should be aware of before investing. Is Tsumura not quite the opportunity you were looking for? Why not check out our selection of top 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.