Kadoya Sesame Mills' (TSE:2612) Shareholders Will Receive A Bigger Dividend Than Last Year

Kadoya Sesame Mills Incorporated (TSE:2612) will increase its dividend from last year's comparable payment on the 29th of June to ¥105.00. This takes the dividend yield to 2.5%, which shareholders will be pleased with.

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Kadoya Sesame Mills' Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Kadoya Sesame Mills' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 2.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Kadoya Sesame Mills

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. The annual payment during the last 8 years was ¥150.00 in 2017, and the most recent fiscal year payment was ¥95.00. The dividend has shrunk at around 5.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Kadoya Sesame Mills could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Kadoya Sesame Mills' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Kadoya Sesame Mills has 2 warning signs (and 1 which is significant) 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.

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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.