Kaneko Seeds (TSE:1376) Is Due To Pay 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.

View our latest analysis for Kaneko Seeds

Kaneko Seeds' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Kaneko Seeds was paying a whopping 306% as a dividend, but this only made up 37% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 5.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Kaneko Seeds Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥21.00, compared to the most recent full-year payment of ¥31.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.0% 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 5.0% per year. While growth may be thin on the ground, Kaneko Seeds could always pay out a higher proportion of earnings to increase shareholder returns.

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. 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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