Dai-Dan (TSE:1980) Is Paying Out A Larger Dividend Than Last Year

Dai-Dan Co., Ltd.'s (TSE:1980) dividend will be increasing from last year's payment of the same period to ¥98.00 on 30th of June. This makes the dividend yield 5.0%, which is above the industry average.

Check out our latest analysis for Dai-Dan

Dai-Dan's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Dai-Dan's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to fall by 0.003% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 46%, which is comfortable for the company to continue in the future.

Dai-Dan Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥196.00. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Dai-Dan has seen EPS rising for the last five years, at 20% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Dai-Dan's prospects of growing its dividend payments in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Dai-Dan is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Dai-Dan 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.

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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.