KG Intelligence (TSE:2408) Will Pay A Dividend Of ¥18.00

KG Intelligence CO., LTD. (TSE:2408) has announced that it will pay a dividend of ¥18.00 per share on the 18th of August. This makes the dividend yield 5.8%, which is above the industry average.

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KG Intelligence's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

EPS is set to grow by 59.0% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 77%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for KG Intelligence

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥10.80 in 2015 to the most recent total annual payment of ¥36.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

KG Intelligence Might Find It Hard To Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. KG Intelligence has impressed us by growing EPS at 59% per year over the past five years. EPS has been growing well, but KG Intelligence has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think KG Intelligence will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for KG Intelligence (of which 1 is a bit unpleasant!) you should know about. Is KG Intelligence 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.