Kanto Denka Kogyo's (TSE:4047) Upcoming Dividend Will Be Larger Than Last Year's

Kanto Denka Kogyo Co., Ltd.'s (TSE:4047) dividend will be increasing from last year's payment of the same period to ¥8.00 on 9th of December. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Kanto Denka Kogyo

Kanto Denka Kogyo Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 70.6%. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥3.00 total annually to ¥16.00. This means that it has been growing its distributions at 18% per annum over that time. Kanto Denka Kogyo has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Kanto Denka Kogyo May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Kanto Denka Kogyo's EPS has declined at around 3.8% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Kanto Denka Kogyo's Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Kanto Denka Kogyo that you should be aware of before investing. 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.

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