Kasumigaseki CapitalLtd (TSE:3498) Is Paying Out A Larger Dividend Than Last Year

Kasumigaseki Capital Co.,Ltd. (TSE:3498) will increase its dividend from last year's comparable payment on the 1st of December to ¥240.00. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Kasumigaseki CapitalLtd's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Kasumigaseki CapitalLtd's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Kasumigaseki CapitalLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 39.6%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Kasumigaseki CapitalLtd

Kasumigaseki CapitalLtd Is Still Building Its Track Record

It is great to see that Kasumigaseki CapitalLtd has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥240.00. This implies that the company grew its distributions at a yearly rate of about 89% over that duration. Kasumigaseki CapitalLtd has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Kasumigaseki CapitalLtd has seen EPS rising for the last five years, at 98% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Kasumigaseki CapitalLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think Kasumigaseki CapitalLtd will make a great income stock. While Kasumigaseki CapitalLtd is earning enough to cover the payments, the cash flows are lacking. We don't think Kasumigaseki CapitalLtd is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Kasumigaseki CapitalLtd (1 is significant!) that you should be aware of before investing. 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.