DIP's (TSE:2379) Dividend Will Be ¥48.00

DIP Corporation's (TSE:2379) investors are due to receive a payment of ¥48.00 per share on 25th of May. The dividend yield will be 4.5% based on this payment which is still above the industry average.

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DIP's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 6.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

View our latest analysis for DIP

DIP's Dividend Has Lacked Consistency

Looking back, DIP's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was ¥43.00 in 2017, and the most recent fiscal year payment was ¥95.00. This means that it has been growing its distributions at 10% per annum over that time. DIP has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

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. Unfortunately, DIP's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.1% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think DIP 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for DIP that investors should take into consideration. Is DIP 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.