Kyudenko (TSE:1959) Is Increasing Its Dividend To ¥90.00
Kyudenko Corporation (TSE:1959) has announced an increase in its dividend to ¥90.00, yielding 2.9%. The stock price rose 33% in the last three months, impacting the dividend yield. Despite a high payout ratio of 262% previously, earnings are expected to cover future dividends, with a forecasted EPS growth of 8.7%. However, the company's EPS has been flat over the past five years, limiting growth prospects. While the dividend increase is positive, concerns about cash flow sustainability remain.
Kyudenko Corporation (TSE:1959) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥90.00. The payment will take the dividend yield to 2.9%, which is in line with the average for the industry.
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 Kyudenko's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
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Kyudenko's Future Dividend Projections Appear Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Kyudenko was paying a whopping 262% as a dividend, but this only made up 29% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Over the next year, EPS is forecast to expand by 8.7%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
View our latest analysis for Kyudenko
Kyudenko Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥16.00 in 2015 to the most recent total annual payment of ¥180.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Kyudenko's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Kyudenko has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Kyudenko's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Kyudenko's payments are rock solid. While Kyudenko is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Kyudenko that investors should take into consideration. Is Kyudenko not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
