Daishinku (TSE:6962) Is Paying Out A Dividend Of ¥14.00

Daishinku Corp.'s (TSE:6962) investors are due to receive a payment of ¥14.00 per share on 1st of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

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Daishinku's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share is forecast to rise by 63.0% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

See our latest analysis for Daishinku

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥7.50, compared to the most recent full-year payment of ¥28.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Daishinku 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Daishinku hasn't seen much change in its earnings per share over the last five years. So the company has struggled to grow its EPS yet it's still paying out 123% of its earnings. This gives limited room for the company to raise the dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Daishinku (1 is concerning!) that you should be aware of before investing. 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.