KENKO MayonnaiseLtd (TSE:2915) Will Pay A Larger Dividend Than Last Year At ¥20.00

KENKO Mayonnaise Co.,Ltd.'s (TSE:2915) dividend will be increasing from last year's payment of the same period to ¥20.00 on 10th of June. This makes the dividend yield about the same as the industry average at 2.0%.

View our latest analysis for KENKO MayonnaiseLtd

KENKO MayonnaiseLtd's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, KENKO MayonnaiseLtd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 18.6%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥21.00, compared to the most recent full-year payment of ¥40.00. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, KENKO MayonnaiseLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On KENKO MayonnaiseLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think KENKO MayonnaiseLtd's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for KENKO MayonnaiseLtd that investors should take into consideration. Is KENKO MayonnaiseLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.