Daiwabo Holdings' (TSE:3107) Upcoming Dividend Will Be Larger Than Last Year's

Daiwabo Holdings Co., Ltd. (TSE:3107) will increase its dividend from last year's comparable payment on the 2nd of December to ¥50.00. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

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Daiwabo Holdings' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Daiwabo Holdings was paying a whopping 362% as a dividend, but this only made up 30% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 2.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Daiwabo Holdings

Daiwabo Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥12.00 total annually to ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Daiwabo Holdings May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Daiwabo Holdings has only grown its earnings per share at 4.3% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Daiwabo Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Daiwabo Holdings you should be aware of, and 1 of them can't be ignored. 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.