Kato Sangyo's (TSE:9869) Upcoming Dividend Will Be Larger Than Last Year's

The board of Kato Sangyo Co., Ltd. (TSE:9869) has announced that it will be paying its dividend of ¥70.00 on the 4th of June, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

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Kato Sangyo's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Kato Sangyo's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 16.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

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Kato Sangyo Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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 seen EPS rising for the last five years, at 17% per annum. Kato Sangyo definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Kato Sangyo Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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. For example, we've picked out 1 warning sign for Kato Sangyo that investors should know about before committing capital to this stock. 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.