AGC Inc. (TSE:5201) will pay a dividend of ¥105.00 on the 31st of March. The dividend yield will be 4.5% based on this payment which is still above the industry average.
View our latest analysis for AGC
AGC Might Find It Hard To Continue The Dividend
If the payments aren't sustainable, a high yield for a few years won't matter that much. AGC is unprofitable despite paying a dividend, and it is paying out 132% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.
Over the next year, EPS is forecast to expand by 74.4%. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥90.00 in 2014, and the most recent fiscal year payment was ¥210.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Dividend Growth Potential Is Shaky
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 sinking by 32% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
AGC's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help AGC make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for AGC that investors should take into consideration. Is AGC not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
About TSE:5201
AGC
Manufactures and sells glass, electronics, chemicals, automotive, and ceramics worldwide.
Flawless balance sheet and undervalued.
