Ki-Star Real EstateLtd (TSE:3465) Is Paying Out Less In Dividends Than Last Year

Ki-Star Real Estate Co.,Ltd (TSE:3465) has announced that on 27th of June, it will be paying a dividend of¥62.00, which a reduction from last year's comparable dividend. The dividend yield of 4.9% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Ki-Star Real EstateLtd

Ki-Star Real EstateLtd's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Ki-Star Real EstateLtd's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 1.7% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 47%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Ki-Star Real EstateLtd's Dividend Has Lacked Consistency

Looking back, Ki-Star Real EstateLtd's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from ¥42.50 total annually to ¥180.00. This means that it has been growing its distributions at 20% per annum 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Ki-Star Real EstateLtd has seen EPS rising for the last five years, at 13% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Ki-Star Real EstateLtd has 4 warning signs (and 2 which are concerning) we think 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.