KandenkoLtd (TSE:1942) Will Pay A Dividend Of ¥22.00

Kandenko Co.,Ltd.'s (TSE:1942) investors are due to receive a payment of ¥22.00 per share on 5th of December. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for KandenkoLtd

KandenkoLtd's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, KandenkoLtd's dividend was only 28% of earnings, however it was paying out 533% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 3.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

KandenkoLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥12.00 in 2014, and the most recent fiscal year payment was ¥41.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See KandenkoLtd's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that KandenkoLtd has grown earnings per share at 8.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we always like to see the dividend being raised, but we don't think KandenkoLtd will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think KandenkoLtd is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for KandenkoLtd that investors need to be conscious of moving forward. Is KandenkoLtd 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.