The board of DIP Corporation (TSE:2379) has announced that it will be paying its dividend of ¥48.00 on the 27th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.6%, which shareholders will be pleased with.
Check out 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. Prior to this announcement, DIP was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 83% indicates it is more focused on returning cash to shareholders than growing the business.
The next year is set to see EPS grow by 56.1%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥1.60, compared to the most recent full-year payment of ¥96.00. This means that it has been growing its distributions at 51% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
DIP May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. DIP hasn't seen much change in its earnings per share over the last five years. DIP is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On DIP's Dividend
Overall, we always like to see the dividend being raised, but we don't think DIP will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments DIP has been making. Overall, we don't think this company has the makings of a good income stock.
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. As an example, we've identified 2 warning signs for DIP that you should be aware of before investing. 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.
About TSE:2379
DIP
A labor force solution company, provides personnel recruiting services in Japan.
Outstanding track record with flawless balance sheet and pays a dividend.
