Dai Nippon Toryo Company (TSE:4611) Will Pay A Larger Dividend Than Last Year At ¥30.00

Dai Nippon Toryo Company, Limited's (TSE:4611) dividend will be increasing from last year's payment of the same period to ¥30.00 on 1st of July. This makes the dividend yield about the same as the industry average at 2.7%.

See our latest analysis for Dai Nippon Toryo Company

Dai Nippon Toryo Company's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Dai Nippon Toryo Company was paying only paying out a fraction of earnings, but the payment was a massive 221% 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.

If the trend of the last few years continues, EPS will grow by 0.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dai Nippon Toryo Company Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥30.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dai Nippon Toryo Company May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately, Dai Nippon Toryo Company's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Dai Nippon Toryo Company could always pay out a higher proportion of earnings to increase shareholder returns.

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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Dai Nippon Toryo Company you should be aware of, and 1 of them is significant. 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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