Tokyo Seimitsu (TSE:7729) Is Due To Pay A Dividend Of ¥111.00
Tokyo Seimitsu Co., Ltd. (TSE:7729) has announced that it will pay a dividend of ¥111.00 per share on the 24th of June. The yield is still above the industry average at 2.0%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Tokyo Seimitsu's stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Tokyo Seimitsu's Payment Could Potentially Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Tokyo Seimitsu was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 13.1%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Tokyo Seimitsu
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥52.00 in 2015, and the most recent fiscal year payment was ¥222.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
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. Tokyo Seimitsu has impressed us by growing EPS at 24% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
We Really Like Tokyo Seimitsu's Dividend
In general, we don't like to see the dividend being cut, especially when the company has such high potential like Tokyo Seimitsu does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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 Tokyo Seimitsu that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.