Toshiba Tec's (TSE:6588) Shareholders Will Receive A Smaller Dividend Than Last Year

Toshiba Tec Corporation (TSE:6588) is reducing its dividend from last year's comparable payment to ¥20.00 on the 4th of June. This means that the annual payment is 1.6% of the current stock price, which is lower than what the rest of the industry is paying.

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Toshiba Tec's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Toshiba Tec's Could Struggle to Maintain Dividend Payments In The Future

Toshiba Tec's Future Dividends May Potentially Be At Risk

Even a low dividend yield can be attractive if it is sustained for years on end. While Toshiba Tec is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Earnings per share is forecast to rise by 109.4% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 171%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Toshiba Tec

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥70.00 total annually to ¥45.00. Doing the maths, this is a decline of about 4.3% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Toshiba Tec has been growing its earnings per share at 18% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

Our Thoughts On Toshiba Tec's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Toshiba Tec management tenure, salary, and performance. 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.