Kyudenko (TSE:1959) Is Increasing Its Dividend To ¥75.00

The board of Kyudenko Corporation (TSE:1959) has announced that the dividend on 4th of June will be increased to ¥75.00, which will be 15% higher than last year's payment of ¥65.00 which covered the same period. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

See our latest analysis for Kyudenko

Kyudenko's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Kyudenko was paying a whopping 291% as a dividend, but this only made up 14% of its overall earnings. 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 6.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Kyudenko Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥130.00. This means that it has been growing its distributions at 29% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Kyudenko May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Kyudenko has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Kyudenko's payments are rock solid. While Kyudenko is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Kyudenko that investors should take into consideration. Is Kyudenko 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.