Keikyu (TSE:9006) Will Pay A Dividend Of ¥8.00

The board of Keikyu Corporation (TSE:9006) has announced that it will pay a dividend of ¥8.00 per share on the 27th of November. This makes the dividend yield about the same as the industry average at 1.3%.

Check out our latest analysis for Keikyu

Keikyu's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Keikyu is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to fall by 50.5%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 10%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥12.00 in 2014 to the most recent total annual payment of ¥16.00. This means that it has been growing its distributions at 2.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Keikyu has impressed us by growing EPS at 32% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Keikyu's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Keikyu's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Keikyu you should be aware of, and 2 of them are a bit concerning. 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.

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