Kitagawa SeikiLtd (TSE:6327) Has Announced A Dividend Of ¥8.00

Kitagawa Seiki Co.,Ltd. (TSE:6327) will pay a dividend of ¥8.00 on the 28th of September. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.

View our latest analysis for Kitagawa SeikiLtd

Kitagawa SeikiLtd's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Kitagawa SeikiLtd's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 15.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.8% by next year, which is in a pretty sustainable range.

Kitagawa SeikiLtd Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of ¥5.00 in 2020 to the most recent total annual payment of ¥8.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Kitagawa SeikiLtd has impressed us by growing EPS at 31% 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.

Kitagawa SeikiLtd 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 example, we've picked out 3 warning signs for Kitagawa SeikiLtd that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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