Tokyo Seimitsu's (TSE:7729) Dividend Will Be ¥114.00

The board of Tokyo Seimitsu Co., Ltd. (TSE:7729) has announced that it will pay a dividend of ¥114.00 per share on the 24th of June. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

See our latest analysis for Tokyo Seimitsu

Tokyo Seimitsu'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. Before making this announcement, Tokyo Seimitsu was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 4.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥228.00. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Tokyo Seimitsu has been growing its earnings per share at 23% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Tokyo Seimitsu Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Tokyo Seimitsu is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Tokyo Seimitsu has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.