Kyosan Electric Manufacturing (TSE:6742) Will Pay A Dividend Of ¥5.00

The board of Kyosan Electric Manufacturing Co., Ltd. (TSE:6742) has announced that it will pay a dividend of ¥5.00 per share on the 4th of December. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

View our latest analysis for Kyosan Electric Manufacturing

Kyosan Electric Manufacturing's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Kyosan Electric Manufacturing's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 8.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kyosan Electric Manufacturing Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥20.00. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Kyosan Electric Manufacturing Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Kyosan Electric Manufacturing has seen EPS rising for the last five years, at 8.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Kyosan Electric Manufacturing's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kyosan Electric Manufacturing's payments, as there could be some issues with sustaining them into the future. While Kyosan Electric Manufacturing is earning enough to cover the payments, the cash flows are lacking. We don't think Kyosan Electric Manufacturing is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Kyosan Electric Manufacturing you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com