The board of Alinco Incorporated (TSE:5933) has announced that it will pay a dividend on the 22nd of November, with investors receiving ¥21.00 per share. This takes the dividend yield to 4.3%, which shareholders will be pleased with.
Check out our latest analysis for Alinco
Alinco's Dividend Is 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, Alinco's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, EPS could fall by 1.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Alinco Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥34.00, compared to the most recent full-year payment of ¥44.00. This means that it has been growing its distributions at 2.6% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. However, Alinco's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Alinco's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Alinco's payments are rock solid. While Alinco is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
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. Just as an example, we've come across 4 warning signs for Alinco you should be aware of, and 2 of them are a bit concerning. 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.
About TSE:5933
Alinco
Develops, manufactures, and sells scaffolding equipment in Japan and internationally.
Established dividend payer slight.
