Stock Analysis

Alinco (TSE:5933) Is Increasing Its Dividend To ¥22.00

TSE:5933
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Alinco Incorporated's (TSE:5933) dividend will be increasing from last year's payment of the same period to ¥22.00 on 29th of May. This makes the dividend yield 4.5%, which is above the industry average.

Check out our latest analysis for Alinco

Alinco'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, Alinco'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.

Unless the company can turn things around, EPS could fall by 6.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 60%, which is definitely feasible to continue.

historic-dividend
TSE:5933 Historic Dividend November 23rd 2024

Alinco Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥34.00 in 2014 to the most recent total annual payment of ¥44.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Alinco's EPS has declined at around 6.7% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Alinco has 4 warning signs (and 2 which make us uncomfortable) we think you should know about. Is Alinco not quite the opportunity you were looking for? Why not check out our selection of top 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.