Tri Chemical Laboratories (TSE:4369) Will Pay A Dividend Of ¥35.00

Tri Chemical Laboratories Inc.'s (TSE:4369) investors are due to receive a payment of ¥35.00 per share on 25th of April. This payment means that the dividend yield will be 1.2%, which is around the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Tri Chemical Laboratories' Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Tri Chemical Laboratories is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 11.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Tri Chemical Laboratories

Tri Chemical Laboratories Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the annual payment back then was ¥6.50, compared to the most recent full-year payment of ¥35.00. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. Tri Chemical Laboratories has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Tri Chemical Laboratories has impressed us by growing EPS at 10% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Tri Chemical Laboratories 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.