KOSÉ's (TSE:4922) Dividend Will Be ¥70.00

The board of KOSÉ Corporation (TSE:4922) has announced that it will pay a dividend on the 9th of September, with investors receiving ¥70.00 per share. This payment means that the dividend yield will be 1.7%, which is around the industry average.

View our latest analysis for KOSÉ

KOSÉ's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, KOSÉ was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 74.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥42.00 in 2014 to the most recent total annual payment of ¥140.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. KOSÉ's earnings per share has shrunk at 21% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for KOSÉ that investors need to be conscious of moving forward. 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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