Tri Chemical Laboratories (TSE:4369) Has Announced A Dividend Of ¥30.00

The board of Tri Chemical Laboratories Inc. (TSE:4369) has announced that it will pay a dividend on the 28th of April, with investors receiving ¥30.00 per share. This means that the annual payment will be 1.0% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Tri Chemical Laboratories

Tri Chemical Laboratories' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Tri Chemical Laboratories' 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 35.6%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Tri Chemical Laboratories Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from ¥6.50 total annually to ¥30.00. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Tri Chemical Laboratories May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Tri Chemical Laboratories' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Tri Chemical Laboratories could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Tri Chemical Laboratories' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Tri Chemical Laboratories is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Tri Chemical Laboratories (of which 1 can't be ignored!) you should know about. Is Tri Chemical Laboratories 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.