Tachibana Eletech (TSE:8159) Has Announced A Dividend Of ¥50.00

Tachibana Eletech Co., Ltd. (TSE:8159) has announced that it will pay a dividend of ¥50.00 per share on the 5th of December. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.

View our latest analysis for Tachibana Eletech

Tachibana Eletech's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tachibana Eletech's dividend was only 40% of earnings, however it was paying out 332% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 2.1% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

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. Since 2014, the annual payment back then was ¥16.67, compared to the most recent full-year payment of ¥100.00. This means that it has been growing its distributions at 20% per annum over that time. Tachibana Eletech has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Tachibana Eletech has grown earnings per share at 13% per year over the past five years. Tachibana Eletech definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Tachibana Eletech's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tachibana Eletech's payments, as there could be some issues with sustaining them into the future. While Tachibana Eletech is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Tachibana Eletech that you should be aware of before investing. 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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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.

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