LIXIL (TSE:5938) Is Paying Out A Dividend Of ¥45.00

LIXIL Corporation (TSE:5938) has announced that it will pay a dividend of ¥45.00 per share on the 4th of June. The dividend yield will be 5.0% based on this payment which is still above the industry average.

View our latest analysis for LIXIL

LIXIL Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though LIXIL isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to rise by 54.3%. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

LIXIL Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥90.00. This means that it has been growing its distributions at 4.1% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. LIXIL's earnings per share has shrunk at 21% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On LIXIL's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about LIXIL's payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, LIXIL has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.