Tachibana Eletech (TSE:8159) Is Due To Pay A Dividend Of ¥50.00

The board of Tachibana Eletech Co., Ltd. (TSE:8159) has announced that it will pay a dividend of ¥50.00 per share on the 10th of June. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Tachibana Eletech

Tachibana Eletech's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Tachibana Eletech's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 8.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, 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 Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Tachibana Eletech has been growing its earnings per share at 9.3% a 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.

We Really Like Tachibana Eletech's Dividend

Overall, we like to see the dividend staying consistent, and we think Tachibana Eletech might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend 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. For example, we've picked out 1 warning sign for Tachibana Eletech that investors should know about before committing capital to this stock. Is Tachibana Eletech not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.