Kaneko Seeds' (TSE:1376) Dividend Will Be ¥22.00

The board of Kaneko Seeds Co., Ltd. (TSE:1376) has announced that it will pay a dividend on the 28th of August, with investors receiving ¥22.00 per share. This makes the dividend yield 2.3%, which will augment investor returns quite nicely.

Check out our latest analysis for Kaneko Seeds

Kaneko Seeds' Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Kaneko Seeds was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 0.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Kaneko Seeds Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥22.00 in 2015 to the most recent total annual payment of ¥33.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Kaneko Seeds' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kaneko Seeds' 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Kaneko Seeds that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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