Kaken Pharmaceutical's (TSE:4521) Dividend Will Be ¥75.00

Kaken Pharmaceutical Co., Ltd. (TSE:4521) will pay a dividend of ¥75.00 on the 1st of July. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Kaken Pharmaceutical

Kaken Pharmaceutical Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 190% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 34.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.

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 implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 28% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Kaken Pharmaceutical's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

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. For example, we've identified 4 warning signs for Kaken Pharmaceutical (2 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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