Kohnan Shoji (TSE:7516) Will Pay A Dividend Of ¥50.00

Kohnan Shoji Co., Ltd. (TSE:7516) has announced that it will pay a dividend of ¥50.00 per share on the 2nd of June. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Kohnan Shoji

Kohnan Shoji's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Kohnan Shoji's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 5.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kohnan Shoji Doesn't Have A Long Payment History

Kohnan Shoji's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the annual payment back then was ¥44.00, compared to the most recent full-year payment of ¥100.00. This means that it has been growing its distributions at 12% per annum over that time. Kohnan Shoji 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 Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Kohnan Shoji has seen EPS rising for the last five years, at 5.2% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Kohnan Shoji's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Kohnan Shoji you should be aware of, and 2 of them shouldn't be ignored. 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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