Toho Acetylene's (TSE:4093) Dividend Will Be ¥9.00

The board of Toho Acetylene Co., Ltd. (TSE:4093) has announced that it will pay a dividend of ¥9.00 per share on the 3rd of June. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

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Toho Acetylene'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. The last payment was quite easily covered by earnings, but it made up 812% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS could expand by 9.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Toho Acetylene

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥14.00. This works out to be a decline of approximately 3.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Toho Acetylene Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Toho Acetylene has grown earnings per share at 9.1% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the 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 Toho Acetylene's payments, as there could be some issues with sustaining them into the future. While Toho Acetylene is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 2 warning signs for Toho Acetylene that investors need to be conscious of moving forward. 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.