Kaneko Seeds (TSE:1376) Has Announced A Dividend Of ¥20.00

Kaneko Seeds Co., Ltd. (TSE:1376) will pay a dividend of ¥20.00 on the 28th of August. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Kaneko Seeds

Kaneko Seeds' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Kaneko Seeds was paying a whopping 306% as a dividend, but this only made up 37% 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.

Over the next year, EPS could expand by 5.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Kaneko Seeds Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from ¥21.00 total annually to ¥31.00. This implies that the company grew its distributions at a yearly rate of about 4.0% 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 could be attracted to the stock based on the quality of its payment history. However, Kaneko Seeds has only grown its earnings per share at 5.0% per annum over the past five years. If Kaneko Seeds is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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. While Kaneko Seeds is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Kaneko Seeds that investors should take into consideration. Is Kaneko Seeds not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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