Kanagawa Chuo Kotsu (TSE:9081) Is Paying Out A Larger Dividend Than Last Year

Kanagawa Chuo Kotsu Co., Ltd. (TSE:9081) will increase its dividend from last year's comparable payment on the 30th of June to ¥50.00. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Kanagawa Chuo Kotsu

Kanagawa Chuo Kotsu's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Kanagawa Chuo Kotsu was paying a whopping 305% as a dividend, but this only made up 18% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 7.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

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 2015, the dividend has gone from ¥25.00 total annually to ¥100.00. This means that it has been growing its distributions at 15% per annum 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.

We Could See Kanagawa Chuo Kotsu's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Kanagawa Chuo Kotsu has seen EPS rising for the last five years, at 7.4% per annum. Kanagawa Chuo Kotsu 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 Kanagawa Chuo Kotsu'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 would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Kanagawa Chuo Kotsu you should be aware of, and 1 of them makes us a bit uncomfortable. Is Kanagawa Chuo Kotsu 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.