The Board of TRANSACTION CO., LTD. (TSE:7818) has announced that it will pay its dividend of 37.00 yen on November 8. This is a higher payment than the comparable dividend paid last year, bringing the dividend yield to 2.0%, which will be welcomed by shareholders.

Check out our latest analysis for TRANSACTIONLtd

TRANSACTIONLtd’s dividend is well covered by earnings

A high dividend payout over several years doesn’t mean much if it can’t be sustained. However, prior to this announcement, TRANSACTIONLtd’s dividend was comfortably covered by cash flow and profits. This means that the majority of the company’s profits are used to grow its business.

Next year, EPS is expected to grow by 8.5%. If the dividend stays on this path, the payout ratio could be 34% next year, which we believe can be quite sustainable going forward.

TRANSACTIONLtd has a solid track record

The company has a long history of paying dividends and these have been relatively stable, giving us confidence in its future dividend potential. Since 2014, the annual payment was 2.75 yen, compared to the last annual payment of 37.00 yen. This means that payouts have increased by 30% annually during this time. Dividends that grow rapidly over the long term are a very valuable trait for a dividend stock.

The dividend is likely to increase

Investors in the company will be happy to see that it has been receiving dividends for some time. TRANSACTION Ltd. has seen earnings per share grow by 21% per year over the past five years. Earnings per share are growing solidly and the payout ratio is low, which we believe is an ideal combination for a dividend stock as the company can increase the dividend fairly easily in the future.

TRANSACTIONLtd looks like a great dividend stock

Overall, we think this could be an attractive dividend stock, and it will get even better by paying a higher dividend this year. Distributions are fairly easily covered by earnings, which are also converted to cash flow. All in all, this stock meets many of the criteria we look for when selecting a dividend stock.

Investors generally prefer companies with a consistent, stable dividend policy over companies with an irregular dividend policy. However, investors must consider other aspects when analyzing stock performance. If you want to take a closer look, it is worth taking a look at our free Research on TRANSACTIONLtd Term of officeSalary and performance. If you are a dividend investor, you may also want to take a look at our curated list of high dividend stocks.

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