Kawai Musical Instruments Manufacturing (TSE:7952) Has Affirmed Its Dividend Of ¥95.00

The board of Kawai Musical Instruments Manufacturing Co., Ltd. (TSE:7952) has announced that it will pay a dividend of ¥95.00 per share on the 26th of June. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

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Kawai Musical Instruments Manufacturing's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the dividend made up 157% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, EPS could fall by 8.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 186%, which is definitely a bit high to be sustainable going forward.

See our latest analysis for Kawai Musical Instruments Manufacturing

Kawai Musical Instruments Manufacturing Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥45.00 total annually to ¥95.00. This means that it has been growing its distributions at 7.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. It's not great to see that Kawai Musical Instruments Manufacturing's earnings per share has fallen at approximately 8.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Kawai Musical Instruments Manufacturing'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. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Kawai Musical Instruments Manufacturing has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.