Stock Analysis

Kyoritsu Maintenance (TSE:9616) Is Paying Out A Larger Dividend Than Last Year

TSE:9616
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Kyoritsu Maintenance Co., Ltd.'s (TSE:9616) dividend will be increasing from last year's payment of the same period to ¥28.00 on 1st of July. This makes the dividend yield 0.9%, which is above the industry average.

See our latest analysis for Kyoritsu Maintenance

Kyoritsu Maintenance's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Kyoritsu Maintenance was paying a whopping 560% as a dividend, but this only made up 14% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

The next year is set to see EPS grow by 85.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

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TSE:9616 Historic Dividend March 4th 2024

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥56.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Kyoritsu Maintenance has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Kyoritsu Maintenance May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that Kyoritsu Maintenance's earnings per share has fallen at approximately 4.5% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Kyoritsu Maintenance's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Kyoritsu Maintenance will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Kyoritsu Maintenance that investors should take into consideration. 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.