Kaken Pharmaceutical's (TSE:4521) Dividend Will Be ¥95.00

Kaken Pharmaceutical Co., Ltd.'s (TSE:4521) investors are due to receive a payment of ¥95.00 per share on 30th of June. This takes the dividend yield to 4.7%, which shareholders will be pleased with.

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Kaken Pharmaceutical's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share is forecast to rise by 9.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Check out our latest analysis for Kaken Pharmaceutical

Kaken Pharmaceutical Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥108.00 total annually to ¥190.00. This means that it has been growing its distributions at 5.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

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 Kaken Pharmaceutical's EPS has declined at around 48% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Kaken Pharmaceutical's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Kaken Pharmaceutical will make a great income stock. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Kaken Pharmaceutical (1 is 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.