Toho Gas (TSE:9533) Has Announced A Dividend Of ¥40.00

Toho Gas Co., Ltd.'s (TSE:9533) investors are due to receive a payment of ¥40.00 per share on 2nd of December. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

Check out our latest analysis for Toho Gas

Toho Gas' Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Toho Gas was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, earnings per share is forecast to fall by 4.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 32%, which is comfortable for the company to continue in the future.

Toho Gas Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥45.00 in 2014, and the most recent fiscal year payment was ¥80.00. This means that it has been growing its distributions at 5.9% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Toho Gas has seen EPS rising for the last five years, at 14% per annum. Toho Gas definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For example, we've picked out 1 warning sign for Toho Gas that investors should know about before committing capital to this stock. Is Toho Gas 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.

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