Daiwa House Industry (TSE:1925) Will Pay A Larger Dividend Than Last Year At ¥100.00

The board of Daiwa House Industry Co., Ltd. (TSE:1925) has announced that it will be paying its dividend of ¥100.00 on the 30th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

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Daiwa House Industry'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. Daiwa House Industry is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 7.2% over the next year. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Daiwa House Industry

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥165.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. Daiwa House Industry has impressed us by growing EPS at 13% per year over the past five years. Daiwa House Industry definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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 would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Daiwa House Industry you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.