ITFOR (TSE:4743) Is Increasing Its Dividend To ¥50.00

The board of ITFOR Inc. (TSE:4743) has announced that it will be paying its dividend of ¥50.00 on the 23rd of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 6.0%, which shareholders will be pleased with.

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ITFOR's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, ITFOR's dividend was only 52% of earnings, however it was paying out 139% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to grow by 9.1% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 77% which is a bit high but can definitely be sustainable.

View our latest analysis for ITFOR

ITFOR Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥100.00. This means that it has been growing its distributions at 21% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. ITFOR has impressed us by growing EPS at 16% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On ITFOR's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While ITFOR is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for ITFOR that investors need to be conscious of moving forward. Is ITFOR 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.