Kanaden (TSE:8081) Will Pay A Larger Dividend Than Last Year At ¥31.00

The board of Kanaden Corporation (TSE:8081) has announced that it will be paying its dividend of ¥31.00 on the 28th of November, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 4.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Kanaden

Kanaden's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Kanaden was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 6.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥17.00 in 2014, and the most recent fiscal year payment was ¥62.00. This implies that the company grew its distributions at a yearly rate of about 14% 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.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kanaden has impressed us by growing EPS at 6.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Kanaden (of which 1 can't be ignored!) you should know about. 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.