Kawasaki Heavy Industries' (TSE:7012) Dividend Will Be ¥75.00

The board of Kawasaki Heavy Industries, Ltd. (TSE:7012) has announced that it will pay a dividend of ¥75.00 per share on the 3rd of December. Even though the dividend went up, the yield is still quite low at only 1.6%.

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Kawasaki Heavy Industries' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Kawasaki Heavy Industries' dividend was only 33% of earnings, however it was paying out 665% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 15.1%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Kawasaki Heavy Industries

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥100.00 total annually to ¥150.00. This means that it has been growing its distributions at 4.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Kawasaki Heavy Industries has been growing its earnings per share at 38% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Kawasaki Heavy Industries' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Kawasaki Heavy Industries that you should be aware of before investing. Is Kawasaki Heavy Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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