Daiki Aluminium Industry (TSE:5702) Will Pay A Larger Dividend Than Last Year At ¥30.00

Daiki Aluminium Industry Co., Ltd.'s (TSE:5702) dividend will be increasing from last year's payment of the same period to ¥30.00 on 24th of June. This will take the annual payment to 5.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Daiki Aluminium Industry

Estimates Indicate Daiki Aluminium Industry's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Daiki Aluminium Industry was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

EPS is set to fall by 16.5% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 137%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥6.00 total annually to ¥55.00. This means that it has been growing its distributions at 25% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Daiki Aluminium Industry's EPS has declined at around 16% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Daiki Aluminium Industry's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Daiki Aluminium Industry will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Daiki Aluminium Industry 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Daiki Aluminium Industry (of which 2 don't sit too well with us!) you should know about. Is Daiki Aluminium Industry not quite the opportunity you were looking for? Why not check out our selection of top 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.