Global Kids' (TSE:6189) Dividend Will Be Increased To ¥35.00

The board of Global Kids Company Corp. (TSE:6189) has announced that it will be paying its dividend of ¥35.00 on the 20th of December, an increased payment from last year's comparable dividend. This makes the dividend yield 4.9%, which is above the industry average.

View our latest analysis for Global Kids

Global Kids Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to fall by 21.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 170%, which is definitely a bit high to be sustainable going forward.

Global Kids Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the dividend has gone from ¥25.00 total annually to ¥35.00. This means that it has been growing its distributions at 12% per annum over that time. Global Kids has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Global Kids' EPS has declined at around 21% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of Global Kids' Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Global Kids you should be aware of, and 2 of them don't sit too well with us. Is Global Kids not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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