KurimotoLtd (TSE:5602) Will Pay A Dividend Of ¥144.00

Kurimoto,Ltd.'s (TSE:5602) investors are due to receive a payment of ¥144.00 per share on 2nd of December. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that KurimotoLtd's stock price has increased by 52% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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KurimotoLtd's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, KurimotoLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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 could rise by 20.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for KurimotoLtd

KurimotoLtd 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. The annual payment during the last 10 years was ¥40.00 in 2015, and the most recent fiscal year payment was ¥288.00. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that KurimotoLtd has been growing its earnings per share at 21% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that KurimotoLtd could prove to be a strong dividend payer.

Our Thoughts On KurimotoLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think KurimotoLtd's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think KurimotoLtd 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for KurimotoLtd that investors need to be conscious of moving forward. 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.