Ki-Star Real EstateLtd (TSE:3465) Is Paying Out A Larger Dividend Than Last Year

Ki-Star Real Estate Co.,Ltd (TSE:3465) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of June to ¥83.00. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

View our latest analysis for Ki-Star Real EstateLtd

Ki-Star Real EstateLtd's Projected Earnings Seem Likely To Cover Future Distributions

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 was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 24.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Ki-Star Real EstateLtd's Dividend Has Lacked Consistency

Looking back, Ki-Star Real EstateLtd's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was ¥42.50, compared to the most recent full-year payment of ¥148.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Ki-Star Real EstateLtd has impressed us by growing EPS at 15% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Ki-Star Real EstateLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Ki-Star Real EstateLtd (of which 1 is significant!) you should know about. 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.