Kaneko Seeds (TSE:1376) Has Affirmed Its Dividend Of ¥11.00

Kaneko Seeds Co., Ltd. (TSE:1376) has announced that it will pay a dividend of ¥11.00 per share on the 10th of February. This makes the dividend yield 2.4%, which will augment investor returns quite nicely.

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Kaneko Seeds' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Kaneko Seeds' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 4.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Kaneko Seeds

Kaneko Seeds 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 ¥24.00 in 2015 to the most recent total annual payment of ¥38.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.7% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Kaneko Seeds May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. 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

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Kaneko Seeds is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 2 warning signs for Kaneko Seeds (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.