Dai Nippon Toryo Company (TSE:4611) Is Increasing Its Dividend To ¥49.00

The board of Dai Nippon Toryo Company, Limited (TSE:4611) has announced that it will be paying its dividend of ¥49.00 on the 30th of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

See our latest analysis for Dai Nippon Toryo Company

Dai Nippon Toryo Company'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, Dai Nippon Toryo Company was paying a whopping 142% as a dividend, but this only made up 18% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

If the trend of the last few years continues, EPS will grow by 10.1% over the next 12 months. 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.

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Dai Nippon Toryo Company Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥12.50, compared to the most recent full-year payment of ¥49.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Dai Nippon Toryo Company has grown earnings per share 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.

Our Thoughts On Dai Nippon Toryo Company's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Dai Nippon Toryo Company's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Dai Nippon Toryo Company that investors should take into consideration. Is Dai Nippon Toryo Company not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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