Kyosan Electric Manufacturing's (TSE:6742) Dividend Will Be ¥13.00

Kyosan Electric Manufacturing Co., Ltd. (TSE:6742) has announced that it will pay a dividend of ¥13.00 per share on the 26th of June. The dividend yield will be 3.8% based on this payment which is still above the industry average.

See our latest analysis for Kyosan Electric Manufacturing

Kyosan Electric Manufacturing's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Kyosan Electric Manufacturing's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Unless the company can turn things around, EPS could fall by 8.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 61%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 2014 to the most recent total annual payment of ¥18.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% 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.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Kyosan Electric Manufacturing's earnings per share has fallen at approximately 8.4% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

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. We don't think Kyosan Electric Manufacturing is a great stock to add to your portfolio if income is your focus.

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. Just as an example, we've come across 3 warning signs for Kyosan Electric Manufacturing you should be aware of, and 1 of them makes us a bit uncomfortable. 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.