Dkk-Toa (TSE:6848) Is Paying Out A Larger Dividend Than Last Year

The board of Dkk-Toa Corporation (TSE:6848) has announced that it will be increasing its dividend by 4.8% on the 27th of June to ¥22.00, up from last year's comparable payment of ¥21.00. This makes the dividend yield 2.5%, which is above the industry average.

View our latest analysis for Dkk-Toa

Dkk-Toa's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Dkk-Toa was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Unless the company can turn things around, EPS could fall by 1.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 45%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dkk-Toa 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. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥21.00. This means that it has been growing its distributions at 7.7% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. However, Dkk-Toa's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Dkk-Toa's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Dkk-Toa is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Dkk-Toa (of which 1 is potentially serious!) you should know about. 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.