Global Kids (TSE:6189) Has Announced That It Will Be Increasing Its Dividend To ¥35.00

Global Kids Company Corp.'s (TSE:6189) dividend will be increasing from last year's payment of the same period to ¥35.00 on 20th of December. This will take the annual payment to 4.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Global Kids

Global Kids' Projections Indicate Future Payments May Be Unsustainable

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. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, EPS could fall by 21.0% 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 170%, which is definitely a bit high to be sustainable going forward.

Global Kids Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of ¥25.00 in 2021 to the most recent total annual payment of ¥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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Global Kids' earnings per share has shrunk at 21% a year over the past five years. 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 seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Global Kids (of which 2 are a bit unpleasant!) you should know about. 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.