Takachiho KohekiLtd (TSE:2676) Will Pay A Dividend Of ¥34.50

The board of Takachiho Koheki Co.,Ltd. (TSE:2676) has announced that it will pay a dividend of ¥34.50 per share on the 5th of December. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.

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Takachiho KohekiLtd's Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Takachiho KohekiLtd's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 49.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 145%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for Takachiho KohekiLtd

Takachiho KohekiLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from ¥12.00 total annually to ¥80.50. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Takachiho KohekiLtd Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Takachiho KohekiLtd has seen EPS rising for the last five years, at 49% per annum. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Our Thoughts On Takachiho KohekiLtd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Takachiho KohekiLtd 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.

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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.