King Jim's (TSE:7962) Dividend Will Be ¥7.00

The board of King Jim Co., Ltd. (TSE:7962) has announced that it will pay a dividend on the 15th of September, with investors receiving ¥7.00 per share. Based on this payment, the dividend yield will be 1.6%, which is fairly typical for the industry.

View our latest analysis for King Jim

King Jim Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. At the time of the last dividend payment, King Jim was paying out a very large proportion of what it was earning and 111% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

If the company can't turn things around, EPS could fall by 23.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 189%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The last annual payment of ¥14.00 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. King Jim's earnings per share has shrunk at 23% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

King Jim's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income 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. For example, we've identified 2 warning signs for King Jim (1 is a bit unpleasant!) that you should be aware of before investing. 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.