Tokyu's (TSE:9005) Dividend Will Be Increased To ¥12.00

Tokyu Corporation (TSE:9005) will increase its dividend from last year's comparable payment on the 30th of June to ¥12.00. This takes the annual payment to 1.4% of the current stock price, which is about average for the industry.

Tokyu's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Tokyu's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 1.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Tokyu

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 2015, the dividend has gone from ¥16.00 total annually to ¥24.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Tokyu Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Tokyu has seen EPS rising for the last five years, at 8.6% per annum. Tokyu definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Tokyu Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Tokyu is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 2 warning signs for Tokyu 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.