KH Neochem (TSE:4189) Has Affirmed Its Dividend Of ¥45.00

KH Neochem Co., Ltd. (TSE:4189) has announced that it will pay a dividend of ¥45.00 per share on the 27th of March. This means the annual payment is 4.5% of the current stock price, which is above the average for the industry.

View our latest analysis for KH Neochem

KH Neochem's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, KH Neochem was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 18.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

KH Neochem Is Still Building Its Track Record

KH Neochem'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. The dividend has gone from an annual total of ¥46.50 in 2016 to the most recent total annual payment of ¥90.00. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. KH Neochem has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

KH Neochem May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. However, KH Neochem's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On KH Neochem's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for KH Neochem that you should be aware of before investing. Is KH Neochem not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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