Kanamic NetworkLTD (TSE:3939) Will Pay A Larger Dividend Than Last Year At ¥6.50

Kanamic Network Co.,LTD (TSE:3939) will increase its dividend from last year's comparable payment on the 25th of December to ¥6.50. This will take the annual payment to 1.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Kanamic NetworkLTD

Kanamic NetworkLTD's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Kanamic NetworkLTD's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 28.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kanamic NetworkLTD Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 5 years was ¥2.00 in 2019, and the most recent fiscal year payment was ¥6.50. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Kanamic NetworkLTD has grown earnings per share at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Kanamic NetworkLTD's prospects of growing its dividend payments in the future.

We Really Like Kanamic NetworkLTD's Dividend

Overall, a dividend increase is always good, and we think that Kanamic NetworkLTD is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Kanamic NetworkLTD stock. Is Kanamic NetworkLTD not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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