DIP (TSE:2379) Is Due To Pay A Dividend Of ¥40.00

DIP Corporation (TSE:2379) has announced that it will pay a dividend of ¥40.00 per share on the 18th of November. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.

View our latest analysis for DIP

DIP's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by DIP's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 46.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

DIP's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the dividend has gone from ¥45.00 total annually to ¥88.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, DIP's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 0.8% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On DIP's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about DIP's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for DIP that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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