Ki-Star Real EstateLtd (TSE:3465) Is Due To Pay A Dividend Of ¥65.00

The board of Ki-Star Real Estate Co.,Ltd (TSE:3465) has announced that it will pay a dividend on the 6th of December, with investors receiving ¥65.00 per share. However, the dividend yield of 3.8% is still a decent boost to shareholder returns.

See our latest analysis for Ki-Star Real EstateLtd

Ki-Star Real EstateLtd's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Ki-Star Real EstateLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 0.3%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Ki-Star Real EstateLtd's Dividend Has Lacked Consistency

It's comforting to see that Ki-Star Real EstateLtd has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was ¥42.50 in 2016, and the most recent fiscal year payment was ¥130.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Ki-Star Real EstateLtd 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Ki-Star Real EstateLtd has impressed us by growing EPS at 13% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Ki-Star Real EstateLtd is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 example, we've identified 4 warning signs for Ki-Star Real EstateLtd (1 is a bit concerning!) that you should be aware of before investing. Is Ki-Star Real EstateLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.

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