Kaga ElectronicsLtd (TSE:8154) Has Affirmed Its Dividend Of ¥110.00

Kaga Electronics Co.,Ltd.'s (TSE:8154) investors are due to receive a payment of ¥110.00 per share on 2nd of December. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Kaga ElectronicsLtd

Kaga ElectronicsLtd's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Kaga ElectronicsLtd's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 7.3% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥30.00 in 2014 to the most recent total annual payment of ¥220.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Kaga ElectronicsLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Kaga ElectronicsLtd has grown earnings per share at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Kaga ElectronicsLtd's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Kaga ElectronicsLtd that investors should take into consideration. Is Kaga ElectronicsLtd 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.