Alpha Purchase Co., Ltd. (TSE:7115) will increase its dividend from last year's comparable payment on the 27th of March to ¥27.00. This takes the dividend yield to 2.6%, which shareholders will be pleased with.
See our latest analysis for Alpha Purchase
Alpha Purchase's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Alpha Purchase was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 5.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
Alpha Purchase Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of ¥15.00 in 2022 to the most recent total annual payment of ¥27.00. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. Alpha Purchase has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
We Could See Alpha Purchase's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. Alpha Purchase has seen EPS rising for the last five years, at 5.7% per annum. Alpha Purchase definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Alpha Purchase that investors should know about before committing capital to this stock. Is Alpha Purchase 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.
About TSE:7115
Alpha Purchase
Provides maintenance, repair, and operations services in Japan.
Excellent balance sheet and good value.
