Kohsoku (TSE:7504) Will Pay A Larger Dividend Than Last Year At ¥58.00
Kohsoku Corporation (TSE:7504) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥58.00. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.
Kohsoku's Payment Could Potentially Have Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Kohsoku's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share could rise by 8.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Kohsoku
Kohsoku Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥56.00. This means that it has been growing its distributions at 9.8% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
We Could See Kohsoku's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Kohsoku has been growing its earnings per share at 8.6% a year over the past five years. Kohsoku definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On Kohsoku's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Kohsoku's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
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. For example, we've picked out 2 warning signs for Kohsoku that investors should know about before committing capital to this stock. 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.