Daiichi Sankyo Company (TSE:4568) Is Paying Out A Larger Dividend Than Last Year

Daiichi Sankyo Company, Limited (TSE:4568) will increase its dividend from last year's comparable payment on the 20th of June to ¥30.00. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Daiichi Sankyo Company

Daiichi Sankyo Company's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Daiichi Sankyo Company's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 88.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥60.00. This means that it has been growing its distributions at 12% per annum over that time. Daiichi Sankyo Company has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Daiichi Sankyo Company has impressed us by growing EPS at 23% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Daiichi Sankyo Company Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Daiichi Sankyo Company is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 14 analysts we track are forecasting for Daiichi Sankyo Company for free with public analyst estimates for the company. 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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