Kameda SeikaLtd (TSE:2220) Is Paying Out A Dividend Of ¥15.00

Kameda Seika Co.,Ltd. (TSE:2220) will pay a dividend of ¥15.00 on the 4th of December. This payment means that the dividend yield will be 1.4%, which is around the industry average.

See our latest analysis for Kameda SeikaLtd

Kameda SeikaLtd's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Kameda SeikaLtd's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 6.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kameda SeikaLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥25.00 in 2014, and the most recent fiscal year payment was ¥57.00. This means that it has been growing its distributions at 8.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Kameda SeikaLtd's earnings per share has shrunk at approximately 9.8% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, a consistent dividend is a good thing, and we think that Kameda SeikaLtd has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 example, we've picked out 1 warning sign for Kameda SeikaLtd that investors should know about before committing capital to this stock. Is Kameda SeikaLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.