Kadoya Sesame Mills (TSE:2612) Is Paying Out A Larger Dividend Than Last Year

Kadoya Sesame Mills Incorporated's (TSE:2612) dividend will be increasing from last year's payment of the same period to ¥105.00 on 29th of June. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.

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Kadoya Sesame Mills' Future Dividend Projections Appear Well Covered By Earnings

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, earnings per share could rise by 2.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Kadoya Sesame Mills

Kadoya Sesame Mills' Dividend Has Lacked Consistency

It's comforting to see that Kadoya Sesame Mills has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from ¥150.00 total annually to ¥95.00. The dividend has shrunk at around 5.5% a year during that period. 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.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Kadoya Sesame Mills' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Kadoya Sesame Mills (of which 1 doesn't sit too well with us!) you should know about. Is Kadoya Sesame Mills not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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