Kyudenko's (TSE:1959) Upcoming Dividend Will Be Larger Than Last Year's

Kyudenko Corporation's (TSE:1959) dividend will be increasing from last year's payment of the same period to ¥75.00 on 4th of June. This makes the dividend yield about the same as the industry average at 3.1%.

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 336% as a dividend, but this only made up 29% 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 6.4%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Kyudenko

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 ¥16.00, compared to the most recent full-year payment of ¥150.00. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Kyudenko May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Kyudenko has only grown its earnings per share at 2.3% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 1 warning sign for Kyudenko that investors need to be conscious of moving forward. 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.