Kisoji (TSE:8160) Has Announced A Dividend Of ¥15.00

Kisoji Co., Ltd. (TSE:8160) has announced that it will pay a dividend of ¥15.00 per share on the 1st of December. This will take the annual payment to 1.3% of the stock price, which is above what most companies in the industry pay.

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Kisoji's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Kisoji was paying out 111% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

If the trend of the last few years continues, EPS will grow by 105.5% over the next 12 months. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 24% which brings it into quite a comfortable range.

View our latest analysis for Kisoji

Kisoji Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from ¥15.00 total annually to ¥30.00. This means that it has been growing its distributions at 19% per annum over that time. Kisoji 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.

Kisoji Might Find It Hard To Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Kisoji has grown earnings per share at 105% per year over the past five years. Although earnings per share is up nicely Kisoji is paying out 111% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Kisoji's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Kisoji's payments are rock solid. Strong earnings growth means Kisoji has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Kisoji stock. Is Kisoji 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.