Kaneko Seeds (TSE:1376) Is Paying Out A Dividend Of ¥20.00

Kaneko Seeds Co., Ltd. (TSE:1376) has announced that it will pay a dividend of ¥20.00 per share on the 28th of August. Based on this payment, the dividend yield on the company's stock will be 2.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Kaneko Seeds

Kaneko Seeds' Dividend Is Well Covered By Earnings

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 paying only paying out a fraction of earnings, but the payment was a massive 302% of cash flows. 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 4.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

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 ¥21.00 in 2014 to the most recent total annual 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

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 4.0% per year. While EPS growth is quite low, Kaneko Seeds has the option to increase the payout ratio to return more cash 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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. For instance, we've picked out 1 warning sign for Kaneko Seeds that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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