Tenox (TSE:1905) Will Pay A Larger Dividend Than Last Year At ¥22.00
Tenox Corporation (TSE:1905) will increase its dividend to ¥22.00 on June 30, a 16% rise from last year's ¥19.00, aligning with the industry average yield of 3.5%. Despite sufficient earnings to cover the dividend, concerns arise as EPS may decline by 4.0% next year. The company's dividend history shows instability, with a CAGR of 13% since 2015 but recent cuts. Caution is advised for dividend investors due to potential earnings decline and three significant warning signs identified for Tenox.
Tenox Corporation (TSE:1905) has announced that it will be increasing its periodic dividend on the 30th of June to ¥22.00, which will be 16% higher than last year's comparable payment amount of ¥19.00. This makes the dividend yield about the same as the industry average at 3.5%.
View our latest analysis for Tenox
Tenox's Future Dividend Projections Appear Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Tenox was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 4.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥12.00 in 2015 to the most recent total annual payment of ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Tenox's earnings per share has shrunk at approximately 4.0% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
Our Thoughts On Tenox's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Tenox's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 identified 3 warning signs for Tenox (1 is significant!) 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.
