Maeda Kosen (TSE:7821) Will Pay A Dividend Of ¥20.00

The board of Maeda Kosen Co., Ltd. (TSE:7821) has announced that it will pay a dividend of ¥20.00 per share on the 30th of September. Even though the dividend went up, the yield is still quite low at only 1.1%.

See our latest analysis for Maeda Kosen

Maeda Kosen's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Maeda Kosen's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 29.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥6.00 in 2014, and the most recent fiscal year payment was ¥40.00. This means that it has been growing its distributions at 21% per annum over that time. Maeda Kosen 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.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Maeda Kosen has seen EPS rising for the last five years, at 9.9% per annum. Maeda Kosen definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Maeda Kosen Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Maeda Kosen is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Maeda Kosen for free with public analyst estimates for the company. Is Maeda Kosen 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.