Katana Capital (ASX:KAT) Has Affirmed Its Dividend Of A$0.005

Katana Capital Limited (ASX:KAT) has announced that it will pay a dividend of A$0.005 per share on the 30th of January. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Katana Capital's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Katana Capital's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 16.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Katana Capital

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was A$0.06 in 2016, and the most recent fiscal year payment was A$0.02. Dividend payments have fallen sharply, down 67% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Katana Capital has seen EPS rising for the last five years, at 16% per annum. Katana Capital definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Katana Capital's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Katana Capital has 4 warning signs (and 2 which make us uncomfortable) we think you should know about. 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.