Kyosan Electric Manufacturing (TSE:6742) Has Affirmed Its Dividend Of ¥15.00

Kyosan Electric Manufacturing Co., Ltd. (TSE:6742) has announced that it will pay a dividend of ¥15.00 per share on the 24th of June. The dividend yield will be 4.1% based on this payment which is still above the industry average.

See our latest analysis for Kyosan Electric Manufacturing

Kyosan Electric Manufacturing's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Kyosan Electric Manufacturing's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 17.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Kyosan Electric Manufacturing Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Kyosan Electric Manufacturing has been growing its earnings per share at 18% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Kyosan Electric Manufacturing's prospects of growing its dividend payments in the future.

Our Thoughts On Kyosan Electric Manufacturing's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Kyosan Electric Manufacturing is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Kyosan Electric Manufacturing (1 is potentially serious!) that you should be aware of before investing. Is Kyosan Electric Manufacturing not quite the opportunity you were looking for? Why not check out our selection of top 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.