Daikoku Denki's (TSE:6430) Dividend Will Be ¥70.00

Daikoku Denki Co., Ltd.'s (TSE:6430) investors are due to receive a payment of ¥70.00 per share on 12th of June. However, the dividend yield of 3.5% is still a decent boost to shareholder returns.

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Daikoku Denki's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Daikoku Denki was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 128.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

See our latest analysis for Daikoku Denki

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Daikoku Denki has impressed us by growing EPS at 129% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Daikoku Denki's Dividend

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. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

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 example, we've picked out 1 warning sign for Daikoku Denki 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.