Kato Sangyo (TSE:9869) Has Announced A Dividend Of ¥70.00

Kato Sangyo Co., Ltd. (TSE:9869) has announced that it will pay a dividend of ¥70.00 per share on the 23rd of December. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

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Kato Sangyo's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Kato Sangyo is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 14.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Kato Sangyo

Kato Sangyo Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥44.00, compared to the most recent full-year payment of ¥140.00. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Kato Sangyo has impressed us by growing EPS at 14% per year over the past five years. Kato Sangyo definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Kato Sangyo's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Kato Sangyo's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Kato Sangyo that investors should take into consideration. Is Kato Sangyo 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.