Kao (TSE:4452) Has Announced A Dividend Of ¥77.00

The board of Kao Corporation (TSE:4452) has announced that it will pay a dividend of ¥77.00 per share on the 24th of March. This makes the dividend yield 2.4%, which is above the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Kao's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Kao's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 8.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

View our latest analysis for Kao

Kao Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥76.00 in 2015, and the most recent fiscal year payment was ¥154.00. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Kao May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Although it's important to note that Kao's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 12 analysts are forecasting a turnaround in our free collection of analyst estimates here. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.