Keio's (TSE:9008) Dividend Will Be ¥50.00

Keio Corporation's (TSE:9008) investors are due to receive a payment of ¥50.00 per share on 27th of June. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Keio

Keio's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Keio was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 1.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 dividend has gone from an annual total of ¥40.00 in 2014 to the most recent total annual payment of ¥100.00. This means that it has been growing its distributions at 9.6% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Keio might have put its house in order since then, but we remain cautious.

We Could See Keio's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Keio has impressed us by growing EPS at 5.8% per year over the past five years. Keio definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Keio'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. We don't think Keio 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. To that end, Keio has 4 warning signs (and 2 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.