Kakaku.com (TSE:2371) Will Pay A Dividend Of ¥25.00

The board of Kakaku.com, Inc. (TSE:2371) has announced that it will pay a dividend on the 20th of June, with investors receiving ¥25.00 per share. This will take the annual payment to 2.1% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Kakaku.com

Kakaku.com'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. The last dividend was quite easily covered by Kakaku.com's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 11.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

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 ¥12.50 in 2015, and the most recent fiscal year payment was ¥50.00. This implies that the company grew its distributions at a yearly rate of about 15% 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.

Kakaku.com May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 2.9% a year for the past five years, which isn't massive but still better than seeing them shrink. Kakaku.com is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

We Really Like Kakaku.com's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. 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. 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.