The board of Daiwa House Industry Co., Ltd. (TSE:1925) has announced that it will pay a dividend on the 5th of December, with investors receiving ¥70.00 per share. This makes the dividend yield 3.4%, which is above the industry average.
Check out our latest analysis for Daiwa House Industry
Daiwa House Industry's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Daiwa House Industry was earning enough to cover the dividend, but free cash flows weren't positive. 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 rise by 2.1% over the next year. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥46.00 in 2014 to the most recent total annual payment of ¥145.00. This means that it has been growing its distributions at 12% 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.
The Dividend Has Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Daiwa House Industry has impressed us by growing EPS at 6.5% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Daiwa House Industry's prospects of growing its dividend payments in the future.
Our Thoughts On Daiwa House Industry's Dividend
Overall, we always like to see the dividend being raised, but we don't think Daiwa House Industry will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Daiwa House Industry is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Daiwa House Industry (of which 1 makes us a bit uncomfortable!) you should know about. Is Daiwa House 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.
About TSE:1925
Daiwa House Industry
Engages in the construction contracts business in Japan and internationally.
Fair value with mediocre balance sheet.
