Daiwa House Industry's (TSE:1925) Dividend Will Be Increased To ¥100.00

Daiwa House Industry Co., Ltd. (TSE:1925) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to ¥100.00. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

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Daiwa House Industry's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't 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 7.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Daiwa House Industry

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥165.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year 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 Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Daiwa House Industry has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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. While Daiwa House Industry is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Daiwa House Industry has 2 warning signs (and 1 which is significant) we think 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.