TOYO's (TSE:8151) Upcoming Dividend Will Be Larger Than Last Year's

TOYO Corporation (TSE:8151) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of December to ¥37.00. This takes the dividend yield to 4.1%, which shareholders will be pleased with.

View our latest analysis for TOYO

TOYO's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. TOYO is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to fall by 5.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 53%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 dividend has gone from ¥33.00 total annually to ¥62.00. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

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. We are encouraged to see that TOYO has grown earnings per share at 25% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On TOYO's Dividend

Overall, we always like to see the dividend being raised, but we don't think TOYO will make a great income stock. While TOYO is earning enough to cover the payments, the cash flows are lacking. We don't think TOYO is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, TOYO has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is TOYO 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.