Tokyo Electron (TSE:8035) Is Increasing Its Dividend To ¥306.00

The board of Tokyo Electron Limited (TSE:8035) has announced that it will be paying its dividend of ¥306.00 on the 29th of May, an increased payment from last year's comparable dividend. This will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Tokyo Electron

Tokyo Electron's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite comfortably covered by Tokyo Electron's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 9.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥16.67, compared to the most recent full-year payment of ¥612.00. This means that it has been growing its distributions at 43% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Tokyo Electron has impressed us by growing EPS at 24% per year over the past five years. Tokyo Electron is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Tokyo Electron's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 2 warning signs for Tokyo Electron that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.