Kuraray (TSE:3405) Is Due To Pay A Dividend Of ¥27.00

Kuraray Co., Ltd. (TSE:3405) will pay a dividend of ¥27.00 on the 10th of September. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

Our free stock report includes 3 warning signs investors should be aware of before investing in Kuraray. Read for free now.

Kuraray's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 80% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 26.5% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 63% which brings it into quite a comfortable range.

See our latest analysis for Kuraray

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥36.00 in 2015, and the most recent fiscal year payment was ¥54.00. This means that it has been growing its distributions at 4.1% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Kuraray Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Kuraray has impressed us by growing EPS at 34% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Kuraray hasn't been doing.

Our Thoughts On Kuraray's Dividend

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 payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Kuraray is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 3 warning signs for Kuraray that investors should know about before committing capital to this stock. Is Kuraray not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.