Keyware Solutions' (TSE:3799) Shareholders Will Receive A Bigger Dividend Than Last Year

Keyware Solutions Inc. (TSE:3799) will increase its dividend from last year's comparable payment on the 11th of June to ¥25.00. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Keyware Solutions

Keyware Solutions' 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. Before making this announcement, Keyware Solutions was easily earning enough to cover the dividend. 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 10.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥25.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Keyware Solutions might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Keyware Solutions has grown earnings per share at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Keyware Solutions' prospects of growing its dividend payments in the future.

We Really Like Keyware Solutions' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. For instance, we've picked out 2 warning signs for Keyware Solutions that investors should take into consideration. 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.