KATITAS' (TSE:8919) Upcoming Dividend Will Be Larger Than Last Year's

The board of KATITAS CO., Ltd. (TSE:8919) has announced that it will be paying its dividend of ¥35.00 on the 26th of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.8%.

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KATITAS' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, KATITAS' dividend was only 46% of earnings, however it was paying out 546% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 9.3% over the next year. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for KATITAS

KATITAS' Dividend Has Lacked Consistency

KATITAS has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was ¥13.69, compared to the most recent full-year payment of ¥70.00. This means that it has been growing its distributions at 23% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that KATITAS has grown earnings per share at 12% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think KATITAS' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think KATITAS is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for KATITAS 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.