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

ALCONIX Corporation's (TSE:3036) investors are due to receive a payment of ¥42.00 per share on 26th of November. This makes the dividend yield 3.9%, which is above the industry average.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

ALCONIX's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, ALCONIX's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the trend of the last few years continues, EPS will grow by 4.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for ALCONIX

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. Since 2015, the annual payment back then was ¥18.00, compared to the most recent full-year payment of ¥84.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. ALCONIX has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

ALCONIX 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. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. ALCONIX is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On ALCONIX's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, ALCONIX has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. 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.