Katana Capital (ASX:KAT) Has Re-Affirmed Its Dividend Of AU$0.005

The board of Katana Capital Limited (ASX:KAT) has announced that it will pay a dividend of AU$0.005 per share on the 6th of August. Including this payment, the dividend yield on the stock will be 1.9%, which is a modest boost for shareholders' returns.

View our latest analysis for Katana Capital

Katana Capital's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, Katana Capital's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 51.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.3% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was AU$0.025 in 2011, and the most recent fiscal year payment was AU$0.02. Doing the maths, this is a decline of about 2.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Katana Capital has impressed us by growing EPS at 51% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Katana Capital Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Katana Capital that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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