Daicel (TSE:4202) Has Announced A Dividend Of ¥25.00

Daicel Corporation's (TSE:4202) investors are due to receive a payment of ¥25.00 per share on 26th of June. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Daicel

Daicel's Dividend Is 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, Daicel was paying a whopping 302% as a dividend, but this only made up 23% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 12.8%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Daicel Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Daicel has impressed us by growing EPS at 10% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Daicel is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Daicel that investors need to be conscious of moving forward. 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.