Kamakura Shinsho's (TSE:6184) Dividend Will Be ¥20.00

Kamakura Shinsho, Ltd. (TSE:6184) has announced that it will pay a dividend of ¥20.00 per share on the 21st of April. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

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Kamakura Shinsho's Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Kamakura Shinsho's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 174% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 23.3% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 97%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Kamakura Shinsho

Kamakura Shinsho's Dividend Has Lacked Consistency

Kamakura Shinsho has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of ¥1.50 in 2018 to the most recent total annual payment of ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 45% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Kamakura Shinsho's Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Kamakura Shinsho has grown earnings per share at 23% per year over the past five years. However, Kamakura Shinsho isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Kamakura Shinsho (of which 1 shouldn't be ignored!) you should know about. 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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