Kohsoku (TSE:7504) Will Pay A Dividend Of ¥58.00

Kohsoku Corporation (TSE:7504) will pay a dividend of ¥58.00 on the 26th of June. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.

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Kohsoku's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Kohsoku was paying a whopping 1,888% as a dividend, but this only made up 30% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 9.4% 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 63%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Kohsoku

Kohsoku Has A Solid Track Record

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 ¥22.00 in 2016, and the most recent fiscal year payment was ¥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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Kohsoku has seen EPS rising for the last five years, at 9.4% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

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 be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Kohsoku that investors need to be conscious of moving forward. 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.