ALPHA (TSE:3434) Is Paying Out A Dividend Of ¥20.00

The board of ALPHA Corporation (TSE:3434) has announced that it will pay a dividend of ¥20.00 per share on the 5th of December. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for ALPHA

ALPHA's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, ALPHA was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 4.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 26%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥30.00 in 2014 to the most recent total annual payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

ALPHA May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though ALPHA's EPS has declined at around 4.4% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On ALPHA's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ALPHA's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for ALPHA that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.