Kissei Pharmaceutical (TSE:4547) Will Pay A Dividend Of ¥45.00

Kissei Pharmaceutical Co., Ltd. (TSE:4547) has announced that it will pay a dividend of ¥45.00 per share on the 26th of June. This makes the dividend yield about the same as the industry average at 2.6%.

See our latest analysis for Kissei Pharmaceutical

Kissei Pharmaceutical's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Kissei Pharmaceutical was paying a whopping 1,324% as a dividend, but this only made up 17% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to fall by 4.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Kissei Pharmaceutical Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥90.00. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Kissei Pharmaceutical has grown earnings per share at 22% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Kissei Pharmaceutical's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Kissei Pharmaceutical's payments are rock solid. While Kissei Pharmaceutical is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Kissei Pharmaceutical has 3 warning signs (and 1 which shouldn't be ignored) we think 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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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.