Kaneka's (TSE:4118) Dividend Will Be ¥80.00
Kaneka Corporation (TSE:4118) has announced that it will pay a dividend of ¥80.00 per share on the 8th of June. This takes the dividend yield to 3.8%, which shareholders will be pleased with.
Kaneka's Projected Earnings Seem Likely To Cover Future Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Kaneka was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Over the next year, EPS is forecast to expand by 11.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Kaneka
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥80.00 in 2015 to the most recent total annual payment of ¥160.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kaneka has impressed us by growing EPS at 22% 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.
Our Thoughts On Kaneka's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Kaneka's payments are rock solid. While Kaneka is earning enough to cover the payments, the cash flows are lacking. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Kaneka 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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