Kurotani's (TSE:3168) Dividend Will Be ¥10.00

Kurotani Corporation (TSE:3168) has announced that it will pay a dividend of ¥10.00 per share on the 25th of November. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Kurotani

Kurotani Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Kurotani's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Earnings per share could rise by 19.8% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 122%, which probably can't continue without starting to put some pressure on the balance sheet.

Kurotani Is Still Building Its Track Record

Kurotani's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥20.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Kurotani has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. Kurotani has seen EPS rising for the last five years, at 20% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Kurotani Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

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. To that end, Kurotani has 3 warning signs (and 1 which is potentially serious) we think you should know about. 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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