Kitanotatsujin's (TSE:2930) Dividend Will Be ¥1.20

Kitanotatsujin Corporation's (TSE:2930) investors are due to receive a payment of ¥1.20 per share on 11th of November. Even though the dividend went up, the yield is still quite low at only 1.3%.

Check out our latest analysis for Kitanotatsujin

Kitanotatsujin's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Kitanotatsujin's dividend was only 24% of earnings, however it was paying out 106% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 2.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kitanotatsujin's Dividend Has Lacked Consistency

Looking back, Kitanotatsujin's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ¥4.10 in 2019 to the most recent total annual payment of ¥2.30. Dividend payments have fallen sharply, down 44% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Kitanotatsujin May Find It Hard To Grow The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, Kitanotatsujin's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Kitanotatsujin is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Kitanotatsujin stock. Is Kitanotatsujin not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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