Kakaku.com (TSE:2371) Will Pay A Dividend Of ¥23.00

The board of Kakaku.com, Inc. (TSE:2371) has announced that it will pay a dividend of ¥23.00 per share on the 21st of June. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Kakaku.com

Kakaku.com's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 79% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 39.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Kakaku.com Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥8.75 in 2014, and the most recent fiscal year payment was ¥46.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Kakaku.com May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Kakaku.com hasn't seen much change in its earnings per share over the last five years. Kakaku.com's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Kakaku.com will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Kakaku.com analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.