K&O Energy Group's (TSE:1663) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of K&O Energy Group Inc. (TSE:1663) has announced that it will be paying its dividend of ¥26.00 on the 27th of March, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.5%.

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

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, K&O Energy Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 23.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

View our latest analysis for K&O Energy Group

K&O Energy Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥28.00 total annually to ¥52.00. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that K&O Energy Group has grown earnings per share at 23% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for K&O Energy Group that investors need to be conscious of moving forward. 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.