Asanuma (TSE:1852) Has Announced That It Will Be Increasing Its Dividend To ¥197.50

Asanuma Corporation (TSE:1852) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of June to ¥197.50. This will take the annual payment to 4.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Asanuma

Asanuma Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to grow by 0.8% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 135%, which is a bit high and could start applying pressure to the balance sheet.

Asanuma's Dividend Has Lacked Consistency

Asanuma has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥197.50. This implies that the company grew its distributions at a yearly rate of about 39% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Asanuma's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The earnings growth is anaemic, and the company is paying out 105% of its profit. This gives limited room for the company to raise the dividend in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Asanuma's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. To that end, Asanuma has 3 warning signs (and 2 which don't sit too well with us) we think you should know about. Is Asanuma not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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