Tokyo Electron Device's (TSE:2760) Shareholders Will Receive A Smaller Dividend Than Last Year

Tokyo Electron Device Limited's (TSE:2760) dividend is being reduced from last year's payment covering the same period to ¥32.00 on the 1st of December. However, the dividend yield of 3.2% is still a decent boost to shareholder returns.

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Tokyo Electron Device's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 11.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Tokyo Electron Device

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥20.00 in 2015, and the most recent fiscal year payment was ¥96.00. This means that it has been growing its distributions at 17% per annum over that time. 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. Tokyo Electron Device has seen EPS rising for the last five years, at 27% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Tokyo Electron Device could prove to be a strong dividend payer.

We Really Like Tokyo Electron Device's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Tokyo Electron Device does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Tokyo Electron Device that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.