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

Kyokuto Kaihatsu Kogyo Co.,Ltd.'s (TSE:7226) dividend is being reduced from last year's payment covering the same period to ¥70.00 on the 4th of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

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Estimates Indicate Kyokuto Kaihatsu KogyoLtd's Could Struggle to Maintain Dividend Payments In The Future

A big dividend yield for a few years doesn't mean much if it 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.

Looking forward, EPS could fall by 69.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 140,151%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Kyokuto Kaihatsu KogyoLtd

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥24.00, compared to the most recent full-year payment of ¥140.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kyokuto Kaihatsu KogyoLtd's EPS has fallen by approximately 70% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

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

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an 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 4 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.

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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.