Asahi Diamond Industrial's (TSE:6140) Dividend Will Be ¥15.00

Asahi Diamond Industrial Co., Ltd. (TSE:6140) has announced that it will pay a dividend of ¥15.00 per share on the 29th of June. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

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Asahi Diamond Industrial's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Asahi Diamond Industrial was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 1.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

View our latest analysis for Asahi Diamond Industrial

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥36.00 in 2015 to the most recent total annual payment of ¥30.00. This works out to be a decline of approximately 1.8% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Asahi Diamond Industrial has seen EPS rising for the last five years, at 27% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Asahi Diamond Industrial could prove to be a strong dividend payer.

Our Thoughts On Asahi Diamond Industrial's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Asahi Diamond Industrial's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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 example, we've picked out 2 warning signs for Asahi Diamond Industrial that investors should know about before committing capital to this stock. Is Asahi Diamond Industrial 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.