Kirin Holdings Company's (TSE:2503) Dividend Will Be Increased To ¥37.00

Kirin Holdings Company, Limited (TSE:2503) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of September to ¥37.00. This makes the dividend yield 3.6%, which is above the industry average.

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Kirin Holdings Company's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 18.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 92%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Kirin Holdings Company

Kirin Holdings Company Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥38.00, compared to the most recent full-year payment of ¥74.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Kirin Holdings Company May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Kirin Holdings Company's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. So the company has struggled to grow its EPS yet it's still paying out 99% of its earnings. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

Kirin Holdings Company's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, Kirin Holdings Company has 4 warning signs (and 1 which can't be ignored) we think 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.