Daiki Aluminium Industry (TSE:5702) Will Pay A Dividend Of ¥30.00
Daiki Aluminium Industry Co., Ltd. (TSE:5702) has announced that it will pay a dividend of ¥30.00 per share on the 23rd of June. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.
Daiki Aluminium Industry's Projections Indicate Future Payments May Be Unsustainable
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 2,624% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
If the company can't turn things around, EPS could fall by 54.7% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 6,830%, which is definitely a bit high to be sustainable going forward.
Check out our latest analysis for Daiki Aluminium Industry
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥6.00 in 2015 to the most recent total annual payment of ¥55.00. This means that it has been growing its distributions at 25% per annum over that time. Daiki Aluminium Industry 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.
The Dividend Has Limited Growth Potential
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. Daiki Aluminium Industry's earnings per share has shrunk at 55% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Daiki Aluminium Industry's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Daiki Aluminium Industry make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 5 warning signs for Daiki Aluminium Industry you should be aware of, and 3 of them are concerning. If you are a dividend investor, you might also want to look at our curated list of high yield 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.