Kondotec (TSE:7438) Will Pay A Larger Dividend Than Last Year At ¥23.00

Kondotec Inc. (TSE:7438) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of November to ¥23.00. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

View our latest analysis for Kondotec

Kondotec's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Kondotec was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 4.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kondotec Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥15.50 total annually to ¥46.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.4% a year for the past five years, which isn't massive but still better than seeing them shrink. If Kondotec is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Kondotec Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Kondotec is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Kondotec in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.