ALCONIX's (TSE:3036) Dividend Will Be ¥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 will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

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ALCONIX's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. 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.

Looking forward, earnings per share could rise by 4.3% over the next year if the trend from the last few years continues. 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.

View our latest analysis for ALCONIX

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥18.00 in 2015 to the most recent total annual payment of ¥84.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

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. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ALCONIX will make a great income stock. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for ALCONIX (2 shouldn't be ignored!) that you should be aware of before investing. 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.