Daisue Construction (TSE:1814) Will Pay A Dividend Of ¥35.00

Daisue Construction Co., Ltd.'s (TSE:1814) investors are due to receive a payment of ¥35.00 per share on 6th of June. This will take the annual payment to 4.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Daisue Construction

Daisue Construction Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Daisue Construction was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the company can't turn things around, EPS could fall by 23.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 147%, which could put the dividend in jeopardy if the company's earnings don't improve.

Daisue Construction's Dividend Has Lacked Consistency

Daisue Construction has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2015, the dividend has gone from ¥5.00 total annually to ¥70.00. This implies that the company grew its distributions at a yearly rate of about 34% over that duration. 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 Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Daisue Construction's EPS has fallen by approximately 24% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Daisue Construction will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Daisue Construction has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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