Daihatsu Diesel Mfg (TSE:6023) Is Increasing Its Dividend To ¥50.00

The board of Daihatsu Diesel Mfg. Co., Ltd. (TSE:6023) has announced that it will be paying its dividend of ¥50.00 on the 30th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.2%.

Check out our latest analysis for Daihatsu Diesel Mfg

Daihatsu Diesel Mfg's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Daihatsu Diesel Mfg was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 8.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 30%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Daihatsu Diesel Mfg Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥8.00, compared to the most recent full-year payment of ¥39.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Daihatsu Diesel Mfg has been growing its earnings per share at 36% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Daihatsu Diesel Mfg's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Daihatsu Diesel Mfg you should be aware of, and 1 of them makes us a bit uncomfortable. Is Daihatsu Diesel Mfg not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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