Kadoya Sesame Mills (TSE:2612) Has Announced That Its Dividend Will Be Reduced To ¥85.00

Kadoya Sesame Mills Incorporated (TSE:2612) is reducing its dividend from last year's comparable payment to ¥85.00 on the 30th of June. However, the dividend yield of 2.4% is still a decent boost to shareholder returns.

View our latest analysis for Kadoya Sesame Mills

Kadoya Sesame Mills' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Kadoya Sesame Mills' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 2.0% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is definitely feasible to continue.

Kadoya Sesame Mills' Dividend Has Lacked Consistency

Looking back, Kadoya Sesame Mills' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was ¥150.00, compared to the most recent full-year payment of ¥85.00. Doing the maths, this is a decline of about 7.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Kadoya Sesame Mills May Find It Hard To Grow The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, Kadoya Sesame Mills' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Kadoya Sesame Mills has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.