Dai Nippon Toryo Company's (TSE:4611) Shareholders Will Receive A Bigger Dividend Than Last Year

Dai Nippon Toryo Company, Limited's (TSE:4611) dividend will be increasing from last year's payment of the same period to ¥49.00 on 30th of June. This makes the dividend yield 4.4%, which is above the industry average.

See our latest analysis for Dai Nippon Toryo Company

Dai Nippon Toryo Company's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Dai Nippon Toryo Company was paying only paying out a fraction of earnings, but the payment was a massive 142% 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 8.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, 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. Since 2014, the annual payment back then was ¥12.50, compared to the most recent full-year payment of ¥49.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. 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.

Dai Nippon Toryo Company Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Dai Nippon Toryo Company has seen EPS rising for the last five years, at 8.4% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Dai Nippon Toryo Company will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Dai Nippon Toryo Company 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.