Vital KSK Holdings' (TSE:3151) Dividend Will Be Increased To ¥24.00

Vital KSK Holdings, Inc. (TSE:3151) will increase its dividend from last year's comparable payment on the 5th of June to ¥24.00. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Vital KSK Holdings

Vital KSK Holdings' 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. Prior to this announcement, Vital KSK Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 9.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥18.00, compared to the most recent full-year payment of ¥43.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year 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. Vital KSK Holdings might have put its house in order since then, but we remain cautious.

Vital KSK Holdings Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Vital KSK Holdings has seen EPS rising for the last five years, at 9.3% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Vital KSK Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Vital KSK Holdings' payments are rock solid. While Vital KSK Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Vital KSK Holdings that investors should know about before committing capital to this stock. 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.