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

Kohnan Shoji Co., Ltd.'s (TSE:7516) investors are due to receive a payment of ¥50.00 per share on 2nd of June. This will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Kohnan Shoji

Kohnan Shoji's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Kohnan Shoji's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 5.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Kohnan Shoji Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the dividend has gone from ¥44.00 total annually to ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Kohnan Shoji Could Grow Its Dividend

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 impressed us by growing EPS at 5.2% per year over the past five years. Kohnan Shoji definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 2 warning signs for Kohnan Shoji that investors need to be conscious of moving forward. 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.