K&O Energy Group (TSE:1663) Has Announced A Dividend Of ¥20.00

The board of K&O Energy Group Inc. (TSE:1663) has announced that it will pay a dividend on the 2nd of September, with investors receiving ¥20.00 per share. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that K&O Energy Group's stock price has increased by 57% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for K&O Energy Group

K&O Energy Group's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, K&O Energy Group's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 24.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 24%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

K&O Energy Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥26.00, compared to the most recent full-year payment of ¥42.00. This implies that the company grew its distributions at a yearly rate of about 4.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. K&O Energy Group has impressed us by growing EPS at 24% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like K&O Energy Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

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. Case in point: We've spotted 2 warning signs for K&O Energy Group (of which 1 doesn't sit too well with us!) you should know about. Is K&O Energy Group 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.