Daiichikosho (TSE:7458) Has Announced A Dividend Of ¥29.00

The board of Daiichikosho Co., Ltd. (TSE:7458) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥29.00 per share. The dividend yield will be 3.0% based on this payment which is still above the industry average.

Check out our latest analysis for Daiichikosho

Daiichikosho'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. Prior to this announcement, Daiichikosho's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to fall by 3.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is comfortable for the company to continue in the future.

Daiichikosho Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥32.50, compared to the most recent full-year payment of ¥57.00. This means that it has been growing its distributions at 5.8% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. If Daiichikosho is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Daiichikosho (of which 2 are potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.