K's Holdings (TSE:8282) Has Announced A Dividend Of ¥22.00

K's Holdings Corporation (TSE:8282) will pay a dividend of ¥22.00 on the 5th of December. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.

Check out our latest analysis for K's Holdings

K's Holdings' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, K's Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 20.3%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 89% which is a bit high but can definitely be sustainable.

K's Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2014, and the most recent fiscal year payment was ¥44.00. This means that it has been growing its distributions at 11% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 16% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

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. As an example, we've identified 3 warning signs for K's Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.