Kyokuto Kaihatsu KogyoLtd's (TSE:7226) Shareholders Will Receive A Smaller Dividend Than Last Year

Kyokuto Kaihatsu Kogyo Co.,Ltd. (TSE:7226) has announced that on 4th of December, it will be paying a dividend of¥70.00, which a reduction from last year's comparable dividend. The dividend yield of 5.4% is still a nice boost to shareholder returns, despite the cut.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Kyokuto Kaihatsu KogyoLtd's Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 0.2% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 116%, which is definitely a bit high to be sustainable going forward.

View our latest analysis for Kyokuto Kaihatsu KogyoLtd

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥22.00 in 2015 to the most recent total annual payment of ¥140.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Kyokuto Kaihatsu KogyoLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

We're Not Big Fans Of Kyokuto Kaihatsu KogyoLtd's Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Kyokuto Kaihatsu KogyoLtd you should be aware of, and 2 of them make us uncomfortable. Is Kyokuto Kaihatsu KogyoLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.