Daiseki Eco. Solution's (TSE:1712) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Daiseki Eco. Solution Co., Ltd. (TSE:1712) has announced that it will be paying its dividend of ¥8.00 on the 27th of October, an increased payment from last year's comparable dividend. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

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Daiseki Eco. Solution's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Daiseki Eco. Solution is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 10.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

See our latest analysis for Daiseki Eco. Solution

Daiseki Eco. Solution 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 ¥4.17 in 2015, and the most recent fiscal year payment was ¥16.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Daiseki Eco. Solution has grown earnings per share at 15% per year over the past five years. Daiseki Eco. Solution definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Daiseki Eco. Solution is earning enough to cover the payments, the cash flows are lacking. We don't think Daiseki Eco. Solution is a great stock to add to your portfolio if income is your focus.

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. See if management have their own wealth at stake, by checking insider shareholdings in Daiseki Eco. Solution stock. Is Daiseki Eco. Solution not quite the opportunity you were looking for? Why not check out our selection of top 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.