Idemitsu KosanLtd (TSE:5019) Is Due To Pay A Dividend Of ¥16.00

Idemitsu Kosan Co.,Ltd. (TSE:5019) will pay a dividend of ¥16.00 on the 3rd of June. This means the dividend yield will be fairly typical at 3.4%.

View our latest analysis for Idemitsu KosanLtd

Idemitsu KosanLtd Doesn't Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Idemitsu KosanLtd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 36.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 96%, which could put the dividend in jeopardy if the company's earnings don't improve.

Idemitsu KosanLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Idemitsu KosanLtd's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Idemitsu KosanLtd has seen EPS rising for the last five years, at 8.6% per annum. Idemitsu KosanLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Idemitsu KosanLtd's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Idemitsu KosanLtd (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.