KomeriLtd's (TSE:8218) Upcoming Dividend Will Be Larger Than Last Year's

Komeri Co.,Ltd. (TSE:8218) will increase its dividend from last year's comparable payment on the 2nd of December to ¥28.00. This makes the dividend yield 1.8%, which is above the industry average.

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KomeriLtd's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, KomeriLtd'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 is forecast to expand by 5.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

View our latest analysis for KomeriLtd

KomeriLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥36.00 in 2015, and the most recent fiscal year payment was ¥56.00. This means that it has been growing its distributions at 4.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Unfortunately, KomeriLtd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On KomeriLtd'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 payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 3 analysts are forecasting a turnaround in our free collection of analyst estimates here. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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