Kakiyasu Honten (TSE:2294) Will Pay A Dividend Of ¥85.00
Kakiyasu Honten Co., Ltd. (TSE:2294) will pay a dividend of ¥85.00 on the 28th of July. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.
Estimates Indicate Kakiyasu Honten's Could Struggle to Maintain Dividend Payments In The Future
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
EPS is set to fall by 14.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 146%, which is definitely a bit high to be sustainable going forward.
Check out our latest analysis for Kakiyasu Honten
Kakiyasu Honten Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥42.00 in 2015, and the most recent fiscal year payment was ¥85.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. 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.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Kakiyasu Honten's EPS has declined at around 15% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Kakiyasu Honten (2 are a bit concerning!) that you should be aware of before investing. 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.