The board of Amada Co., Ltd. (TSE:6113) has announced that it will pay a dividend of ¥31.00 per share on the 5th of December. This takes the dividend yield to 3.3%, which shareholders will be pleased with.
See our latest analysis for Amada
Amada's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Amada was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 8.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥62.00. This means that it has been growing its distributions at 16% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
We Could See Amada's Dividend Growing
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Amada has seen EPS rising for the last five years, at 5.8% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Amada that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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About TSE:6113
Amada
Manufactures, sells, leases, repairs, maintains, checks, and inspects metalworking machinery, software, and peripheral equipment in Japan, North America, Europe, Asia, and internationally.
Flawless balance sheet, undervalued and pays a dividend.
