King Jim (TSE:7962) Will Pay A Dividend Of ¥7.00

King Jim Co., Ltd. (TSE:7962) will pay a dividend of ¥7.00 on the 22nd of September. This means that the annual payment will be 1.6% of the current stock price, which is in line with the average for the industry.

We've discovered 3 warning signs about King Jim. View them for free.

Estimates Indicate King Jim's Could Struggle to Maintain Dividend Payments In The Future

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 273% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 38%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, EPS could fall by 30.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 404%, which could put the dividend under pressure if earnings don't start to improve.

View our latest analysis for King Jim

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The payments haven't really changed that much since 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. King Jim's earnings per share has shrunk at 31% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

King Jim's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for King Jim you should be aware of, and 1 of them is a bit unpleasant. 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.