KEL (TSE:6919) Will Pay A Dividend Of ¥40.00

The board of KEL Corporation (TSE:6919) has announced that it will pay a dividend on the 5th of June, with investors receiving ¥40.00 per share. The yield is still above the industry average at 5.6%.

Estimates Indicate KEL's Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, EPS could fall by 1.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 118%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for KEL

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 annual payment during the last 10 years was ¥24.00 in 2015, and the most recent fiscal year payment was ¥80.00. This means that it has been growing its distributions at 13% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

KEL May Find It Hard To Grow The 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. However, KEL's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

We're Not Big Fans Of KEL's Dividend

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for KEL you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.