Kureha (TSE:4023) Will Pay A Larger Dividend Than Last Year At ¥108.00

The board of Kureha Corporation (TSE:4023) has announced that it will be increasing its dividend by 149% on the 3rd of December to ¥108.00, up from last year's comparable payment of ¥43.35. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.

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Kureha's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Kureha's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 21.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 75% by next year, which is in a pretty sustainable range.

View our latest analysis for Kureha

Kureha Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ¥36.67, compared to the most recent full-year payment of ¥86.70. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. In the last five years, Kureha's earnings per share has shrunk at approximately 2.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Kureha's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Kureha's payments are rock solid. While Kureha is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Kureha that investors should take into consideration. 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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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.