Aichi's (TSE:6345) Dividend Will Be ¥20.00

Aichi Corporation (TSE:6345) will pay a dividend of ¥20.00 on the 28th of November. This takes the dividend yield to 3.6%, which shareholders will be pleased with.

See our latest analysis for Aichi

Aichi's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Aichi was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 8.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥10.00 total annually to ¥40.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

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. Aichi hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Aichi's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Aichi's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Aichi has been making. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Aichi that investors need to be conscious of moving forward. 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.