Aisin Corporation (TSE:7259) will pay a dividend of ¥90.00 on the 27th of November. This makes the dividend yield 3.8%, which is above the industry average.
Check out our latest analysis for Aisin
Aisin's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Aisin was paying out 72% of earnings, but a comparatively small 29% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 24.7%. If the dividend continues on this path, the payout ratio could be 64% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥75.00, compared to the most recent full-year payment of ¥180.00. This means that it has been growing its distributions at 9.1% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Aisin might have put its house in order since then, but we remain cautious.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Aisin has seen earnings per share falling at 5.9% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Aisin's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Aisin is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Aisin 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.
About TSE:7259
Aisin
Manufactures and sells automotive parts, and energy and lifestyle related products.
Flawless balance sheet with moderate growth potential.
