CKD (TSE:6407) Is Due To Pay A Dividend Of ¥35.00

CKD Corporation's (TSE:6407) investors are due to receive a payment of ¥35.00 per share on 5th of June. However, the dividend yield of 2.5% is still a decent boost to shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

CKD's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, CKD's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 11.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for CKD

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥22.00 total annually to ¥67.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. CKD has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. CKD has seen EPS rising for the last five years, at 21% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

CKD Looks Like A Great Dividend Stock

Overall, we think that CKD could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for CKD that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.