Chudenko Corporation (TSE:1941) will pay a dividend of ¥65.00 on the 26th of June. Based on this payment, the dividend yield for the company will be 2.9%, which is fairly typical for the industry.
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Chudenko'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.
Looking forward, earnings per share could rise by 35.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Chudenko
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥62.00 in 2015, and the most recent fiscal year payment was ¥130.00. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Chudenko has grown earnings per share at 35% 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.
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Chudenko stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.