Taiyo Yuden's (TSE:6976) Dividend Will Be ¥45.00

Taiyo Yuden Co., Ltd.'s (TSE:6976) investors are due to receive a payment of ¥45.00 per share on 30th of June. This makes the dividend yield 2.6%, which will augment investor returns quite nicely.

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Taiyo Yuden's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Over the next year, EPS is forecast to expand by 38.2%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Check out our latest analysis for Taiyo Yuden

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥10.00 in 2015, and the most recent fiscal year payment was ¥90.00. This means that it has been growing its distributions at 25% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Taiyo Yuden's earnings per share has shrunk at 21% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Taiyo Yuden's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Taiyo Yuden (of which 2 shouldn't be ignored!) you should know about. Is Taiyo Yuden not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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