Tachibana Eletech (TSE:8159) Is Paying Out A Dividend Of ¥50.00

Tachibana Eletech Co., Ltd. (TSE:8159) will pay a dividend of ¥50.00 on the 5th of December. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.

View our latest analysis for Tachibana Eletech

Tachibana Eletech's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Tachibana Eletech was paying a whopping 332% as a dividend, but this only made up 40% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 2.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

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 dividend has gone from ¥16.67 total annually to ¥100.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Tachibana Eletech has seen EPS rising for the last five years, at 13% per annum. Tachibana Eletech definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

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. We don't think Tachibana Eletech is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Tachibana Eletech that investors should take into consideration. Is Tachibana Eletech not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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