Daikoku Denki (TSE:6430) Has Announced That Its Dividend Will Be Reduced To ¥30.00

Daikoku Denki Co., Ltd.'s (TSE:6430) dividend is being reduced from last year's payment covering the same period to ¥30.00 on the 8th of December. The yield is still above the industry average at 3.0%.

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Daikoku Denki's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Daikoku Denki's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 83.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Daikoku Denki

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥50.00 in 2015 to the most recent total annual payment of ¥80.00. This means that it has been growing its distributions at 4.8% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Daikoku Denki has been growing its earnings per share at 84% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Daikoku Denki Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Daikoku Denki has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 picked out 1 warning sign for Daikoku Denki that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.