Daiichikosho (TSE:7458) Has Announced A Dividend Of ¥28.00

Daiichikosho Co., Ltd.'s (TSE:7458) investors are due to receive a payment of ¥28.00 per share on 5th of December. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

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Daiichikosho's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Daiichikosho's dividend was only 39% of earnings, however it was paying out 100% of free 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.

Over the next year, EPS is forecast to fall by 9.7%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is comfortable for the company to continue in the future.

Check out our latest analysis for Daiichikosho

Daiichikosho Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥42.50 in 2015, and the most recent fiscal year payment was ¥57.00. This means that it has been growing its distributions at 3.0% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Daiichikosho Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Daiichikosho has seen EPS rising for the last five years, at 9.7% per annum. Daiichikosho definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Daiichikosho's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 3 warning signs for Daiichikosho you should be aware of, and 1 of them is potentially serious. Is Daiichikosho not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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