Idemitsu KosanLtd (TSE:5019) Is Paying Out A Dividend Of ¥18.00

The board of Idemitsu Kosan Co.,Ltd. (TSE:5019) has announced that it will pay a dividend on the 4th of June, with investors receiving ¥18.00 per share. This means that the annual payment will be 3.1% of the current stock price, which is in line with the average for the industry.

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Idemitsu KosanLtd's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the company was paying out 112% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 21%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 29.4%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 94% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Idemitsu KosanLtd

Idemitsu KosanLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥10.00 in 2015, and the most recent fiscal year payment was ¥36.00. This means that it has been growing its distributions at 14% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Idemitsu KosanLtd has only grown its earnings per share at 3.7% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 112% of its profit. This gives limited room for the company to raise the dividend in the future.

Our Thoughts On Idemitsu KosanLtd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 4 warning signs for Idemitsu KosanLtd that investors need to be conscious of moving forward. 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.