Asahi Kogyosha (TSE:1975) Will Pay A Larger Dividend Than Last Year At ¥80.00

Asahi Kogyosha Co., Ltd. (TSE:1975) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of July to ¥80.00. This makes the dividend yield 3.9%, which is above the industry average.

Check out our latest analysis for Asahi Kogyosha

Asahi Kogyosha's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Asahi Kogyosha was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 4.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥37.50 in 2014 to the most recent total annual payment of ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. 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.

The Dividend's Growth Prospects Are Limited

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. Earnings per share has been crawling upwards at 4.1% per year. While EPS growth is quite low, Asahi Kogyosha has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 instance, we've picked out 1 warning sign for Asahi Kogyosha that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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