Daitobo's (TSE:3202) Upcoming Dividend Will Be Larger Than Last Year's

Daitobo Co., Ltd.'s (TSE:3202) dividend will be increasing from last year's payment of the same period to ¥3.00 on 25th of June. This makes the dividend yield 2.9%, which is above the industry average.

View our latest analysis for Daitobo

Daitobo's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Daitobo's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 13.7% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 73%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Daitobo Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of ¥1.50 in 2023 to the most recent total annual payment of ¥3.00. This means that it has been growing its distributions at 41% per annum over that time. Daitobo has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Daitobo's earnings per share has shrunk at 14% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Daitobo's Dividend

Overall, we always like to see the dividend being raised, but we don't think Daitobo will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Daitobo 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Daitobo (1 can't be ignored!) 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.