KEL (TSE:6919) Is Paying Out Less In Dividends Than Last Year

KEL Corporation's (TSE:6919) dividend is being reduced from last year's payment covering the same period to ¥40.00 on the 6th of December. The yield is still above the industry average at 4.9%.

Check out our latest analysis for KEL

KEL's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, KEL was paying out 94% of earnings, but a comparatively small 57% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 7.0% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 92% which is a bit high but can definitely be sustainable.

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. Since 2014, the annual payment back then was ¥24.00, compared to the most recent full-year payment of ¥80.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

KEL Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that KEL has been growing its earnings per share at 7.0% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for KEL that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.