AlphaPurchase's (TSE:7115) Shareholders Will Receive A Bigger Dividend Than Last Year

AlphaPurchase Corporation (TSE:7115) will increase its dividend from last year's comparable payment on the 27th of March to ¥37.00. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. AlphaPurchase's stock price has reduced by 36% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

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AlphaPurchase's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, AlphaPurchase's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 9.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for AlphaPurchase

AlphaPurchase 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 ¥32.00. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

We Could See AlphaPurchase's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. AlphaPurchase has seen EPS rising for the last five years, at 9.9% per annum. AlphaPurchase definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

AlphaPurchase Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that AlphaPurchase is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for AlphaPurchase that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.