K&O Energy Group (TSE:1663) Has Announced That It Will Be Increasing Its Dividend To ¥22.00

K&O Energy Group Inc.'s (TSE:1663) dividend will be increasing from last year's payment of the same period to ¥22.00 on 27th of March. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for K&O Energy Group

K&O Energy Group's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Over the next year, EPS is forecast to fall by 15.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 21%, which is comfortable for the company to continue in the future.

K&O Energy Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥26.00 total annually to ¥42.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. K&O Energy Group has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 is concerning!) 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.