Kewpie (TSE:2809) Will Pay A Larger Dividend Than Last Year At ¥32.00

Kewpie Corporation (TSE:2809) will increase its dividend on the 5th of August to ¥32.00, which is 39% higher than last year's payment from the same period of ¥23.00. This makes the dividend yield about the same as the industry average at 1.6%.

Our free stock report includes 1 warning sign investors should be aware of before investing in Kewpie. Read for free now.

Kewpie's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Kewpie's 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.

The next year is set to see EPS grow by 2.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Kewpie

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥23.00 in 2015, and the most recent fiscal year payment was ¥54.00. This means that it has been growing its distributions at 8.9% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Kewpie might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Kewpie has impressed us by growing EPS at 10% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Kewpie's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Kewpie that investors need to be conscious of moving forward. Is Kewpie not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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