KG Intelligence (TSE:2408) Will Pay A Dividend Of ¥17.00

The board of KG Intelligence CO., LTD. (TSE:2408) has announced that it will pay a dividend of ¥17.00 per share on the 16th of August. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for KG Intelligence

KG Intelligence's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, KG Intelligence's dividend was only 69% of earnings, however it was paying out 97% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS could expand by 67.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥13.50 total annually to ¥35.00. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that KG Intelligence has been growing its earnings per share at 68% 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 KG Intelligence could prove to be a strong dividend payer.

Our Thoughts On KG Intelligence's Dividend

In summary, while it's always good to see the dividend being raised, we don't think KG Intelligence's payments are rock solid. While KG Intelligence is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 2 warning signs for KG Intelligence that investors need to be conscious of moving forward. 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.