Stock Analysis

Kanagawa Chuo Kotsu's (TSE:9081) Dividend Will Be ¥40.00

TSE:9081
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Kanagawa Chuo Kotsu Co., Ltd. (TSE:9081) has announced that it will pay a dividend of ¥40.00 per share on the 30th of June. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Kanagawa Chuo Kotsu

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Kanagawa Chuo Kotsu's dividend was only 9.2% of earnings, however it was paying out 244% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

If the trend of the last few years continues, EPS will grow by 6.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

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TSE:9081 Historic Dividend November 23rd 2024

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥25.00, compared to the most recent full-year payment of ¥80.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. 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. We are encouraged to see that Kanagawa Chuo Kotsu has grown earnings per share at 6.8% per year over the past five years. 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

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Kanagawa Chuo Kotsu has 3 warning signs (and 1 which is a bit unpleasant) 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.

Valuation is complex, but we're here to simplify it.

Discover if Kanagawa Chuo Kotsu might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.