Takachiho KohekiLtd's (TSE:2676) Dividend Will Be ¥58.00

The board of Takachiho Koheki Co.,Ltd. (TSE:2676) has announced that it will pay a dividend on the 5th of December, with investors receiving ¥58.00 per share. This will take the dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

See our latest analysis for Takachiho KohekiLtd

Takachiho KohekiLtd Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 94% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

EPS is set to grow by 24.2% over the next year if recent trends continue. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 98% over the next year.

Takachiho KohekiLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥24.00 in 2014 to the most recent total annual payment of ¥160.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Takachiho KohekiLtd Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Takachiho KohekiLtd has grown earnings per share at 24% per year over the past five years. While EPS is growing rapidly, Takachiho KohekiLtd paid out a very high 104% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

Our Thoughts On Takachiho KohekiLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think Takachiho KohekiLtd will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Takachiho KohekiLtd that investors should know about before committing capital to this stock. Is Takachiho KohekiLtd 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.

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