Tsumura (TSE:4540) Will Pay A Larger Dividend Than Last Year At ¥68.00

Tsumura & Co. (TSE:4540) will increase its dividend from last year's comparable payment on the 5th of December to ¥68.00. This makes the dividend yield 3.5%, which is above the industry average.

See our latest analysis for Tsumura

Tsumura's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tsumura's earnings easily covered the dividend, but free cash flows were negative. 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.

The next year is set to see EPS grow by 7.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% 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. 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. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

We Could See Tsumura's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Tsumura has grown earnings per share at 9.6% per 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Tsumura that investors should take into consideration. 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.