Toshiba Tec (TSE:6588) Has Announced A Dividend Of ¥20.00

Toshiba Tec Corporation's (TSE:6588) investors are due to receive a payment of ¥20.00 per share on 2nd of December. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Toshiba Tec

Toshiba Tec Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Toshiba Tec isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Analysts are expecting EPS to grow by 15.8% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥45.00. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 45% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Toshiba Tec's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Now, if you want to look closer, it would be worth checking out our free research on Toshiba Tec management tenure, salary, and performance. 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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