Kobayashi Yoko (TSE:8742) Is Due To Pay A Dividend Of ¥5.00

Kobayashi Yoko Co., Ltd.'s (TSE:8742) investors are due to receive a payment of ¥5.00 per share on 30th of June. This means the annual payment will be 1.7% of the current stock price, which is lower than the industry average.

See our latest analysis for Kobayashi Yoko

Kobayashi Yoko's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Kobayashi Yoko was paying a whopping 566% as a dividend, but this only made up 19% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

If the trend of the last few years continues, EPS will grow by 69.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kobayashi Yoko Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥2.50 in 2015 to the most recent total annual payment of ¥5.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Kobayashi Yoko has been growing its earnings per share at 69% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Kobayashi Yoko's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kobayashi Yoko's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 2 warning signs for Kobayashi Yoko that investors should know about before committing capital to this stock. Is Kobayashi Yoko not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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