Kato Sangyo's (TSE:9869) Dividend Will Be Increased To ¥58.00

The board of Kato Sangyo Co., Ltd. (TSE:9869) has announced that it will be paying its dividend of ¥58.00 on the 25th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Kato Sangyo

Kato Sangyo's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Kato Sangyo was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 17.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Kato Sangyo Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥44.00 in 2014, and the most recent fiscal year payment was ¥113.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Kato Sangyo has impressed us by growing EPS at 18% 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.

We Really Like Kato Sangyo's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Kato Sangyo in our latest insider ownership analysis. 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.