KandenkoLtd's (TSE:1942) Dividend Will Be ¥22.00

Kandenko Co.,Ltd. (TSE:1942) has announced that it will pay a dividend of ¥22.00 per share on the 5th of December. This makes the dividend yield about the same as the industry average at 2.4%.

See our latest analysis for KandenkoLtd

KandenkoLtd's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, KandenkoLtd's dividend was only 26% 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.

Over the next year, EPS is forecast to expand by 2.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

KandenkoLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from ¥12.00 total annually to ¥41.00. This means that it has been growing its distributions at 13% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See KandenkoLtd's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. KandenkoLtd has impressed us by growing EPS at 6.8% 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.

Our Thoughts On KandenkoLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While KandenkoLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for KandenkoLtd that investors should know about before committing capital to this stock. 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.

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