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

Kaken Pharmaceutical Co., Ltd.'s (TSE:4521) investors are due to receive a payment of ¥75.00 per share on 30th of June. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Kaken Pharmaceutical

Kaken Pharmaceutical's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Kaken Pharmaceutical's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 56.2%. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 93%, 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 ¥96.00 in 2014, and the most recent fiscal year payment was ¥150.00. This means that it has been growing its distributions at 4.6% per annum 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Kaken Pharmaceutical's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Kaken Pharmaceutical is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Kaken Pharmaceutical Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.