Kaken Pharmaceutical (TSE:4521) Will Pay A Dividend Of ¥75.00

Kaken Pharmaceutical Co., Ltd. (TSE:4521) has announced that it will pay a dividend of ¥75.00 per share on the 30th of June. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Kaken Pharmaceutical

Kaken Pharmaceutical's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Kaken Pharmaceutical was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 56.8% over the next 12 months. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 84%, meaning that most of the company's earnings are being paid out to shareholders.

Kaken Pharmaceutical Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥108.00 in 2015, and the most recent fiscal year payment was ¥150.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Kaken Pharmaceutical May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Kaken Pharmaceutical could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Kaken Pharmaceutical's Dividend

Overall, we like to see the dividend staying consistent, and we think Kaken Pharmaceutical might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Kaken Pharmaceutical that investors need to be conscious of moving forward. Is Kaken Pharmaceutical 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.