Kohsoku (TSE:7504) Is Paying Out A Larger Dividend Than Last Year

Kohsoku Corporation (TSE:7504) will increase its dividend from last year's comparable payment on the 2nd of December to ¥58.00. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.

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Kohsoku's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Kohsoku's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 9.6% 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 46% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Kohsoku

Kohsoku Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥23.00, compared to the most recent full-year payment of ¥56.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% 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.

Kohsoku Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Kohsoku has grown earnings per share at 9.6% per year over the past five years. Kohsoku definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Kohsoku's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Kohsoku is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Kohsoku that investors should know about before committing capital to this stock. Is Kohsoku 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.