KOSAIDO Holdings (TSE:7868) Is Increasing Its Dividend To ¥6.67

KOSAIDO Holdings Co., Ltd. (TSE:7868) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of December to ¥6.67. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

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KOSAIDO Holdings' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, KOSAIDO Holdings' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 13.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for KOSAIDO Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥1.40 in 2015, and the most recent fiscal year payment was ¥13.34. This means that it has been growing its distributions at 25% per annum over that time. KOSAIDO Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that KOSAIDO Holdings has grown earnings per share at 38% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On KOSAIDO Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think KOSAIDO Holdings' payments are rock solid. While KOSAIDO Holdings is earning enough to cover the payments, the cash flows are lacking. We don't think KOSAIDO Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for KOSAIDO Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.