Kitagawa SeikiLtd (TSE:6327) Will Pay A Dividend Of ¥8.00

Kitagawa Seiki Co.,Ltd. (TSE:6327) has announced that it will pay a dividend of ¥8.00 per share on the 28th of September. The dividend yield is 1.0% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Kitagawa SeikiLtd

Kitagawa SeikiLtd's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Kitagawa SeikiLtd's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 15.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 5.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kitagawa SeikiLtd Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of ¥5.00 in 2020 to the most recent total annual payment of ¥8.00. This means that it has been growing its distributions at 12% per annum over that time. Kitagawa SeikiLtd has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Kitagawa SeikiLtd has grown earnings per share at 33% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Kitagawa SeikiLtd's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Kitagawa SeikiLtd that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.