ALCONIX (TSE:3036) Is Due To Pay A Dividend Of ¥42.00

The board of ALCONIX Corporation (TSE:3036) has announced that it will pay a dividend on the 26th of November, with investors receiving ¥42.00 per share. This takes the dividend yield to 4.2%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that ALCONIX's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

ALCONIX's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, ALCONIX's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 2.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for ALCONIX

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 ¥18.00 in 2015, and the most recent fiscal year payment was ¥84.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

ALCONIX May Find It Hard To Grow The Dividend

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 have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.3% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On ALCONIX's Dividend

In summary, while it's always good to see the dividend being raised, we don't think ALCONIX's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for ALCONIX (of which 2 are a bit unpleasant!) you should know about. Is ALCONIX not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.