K&O Energy Group's (TSE:1663) Dividend Will Be Increased 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. Even though the dividend went up, the yield is still quite low at only 1.3%.

View our latest analysis for K&O Energy Group

K&O Energy Group's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, K&O Energy Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 10.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 20%, 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 an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥26.00 total annually to ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% 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 seen EPS rising for the last five years, at 24% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like K&O Energy Group's Dividend

Overall, a dividend increase is always good, and we think that K&O Energy Group is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income 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. As an example, we've identified 2 warning signs for K&O Energy Group that you should be aware of before investing. 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.