Tokyo Radiator Mfg.Co.Ltd's (TSE:7235) Dividend Will Be ¥30.00

The board of Tokyo Radiator Mfg.Co.,Ltd. (TSE:7235) has announced that it will pay a dividend of ¥30.00 per share on the 29th of June. The dividend yield of 3.9% is still a nice boost to shareholder returns, despite the cut.

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Tokyo Radiator Mfg.Co.Ltd's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Tokyo Radiator Mfg.Co.Ltd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 55.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Tokyo Radiator Mfg.Co.Ltd

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 ¥7.50 total annually to ¥59.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Tokyo Radiator Mfg.Co.Ltd has been growing its earnings per share at 55% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Tokyo Radiator Mfg.Co.Ltd Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Tokyo Radiator Mfg.Co.Ltd does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Tokyo Radiator Mfg.Co.Ltd that investors should know about before committing capital to this stock. 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.