Daicel's (TSE:4202) Dividend Will Be ¥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 annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Daicel

Daicel's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Daicel was paying only paying out a fraction of earnings, but the payment was a massive 302% of cash flows. 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.

Looking forward, earnings per share is forecast to rise by 12.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Daicel Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥50.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Daicel has been growing its earnings per share at 10% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Daicel's prospects of growing its dividend payments in the future.

Our Thoughts On Daicel's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Daicel's payments are rock solid. While Daicel is earning enough to cover the payments, the cash flows are lacking. We don't think Daicel 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. Taking the debate a bit further, we've identified 2 warning signs for Daicel that investors need to be conscious of moving forward. 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.