The board of Pilot Corporation (TSE:7846) has announced that it will pay a dividend on the 31st of March, with investors receiving ¥53.00 per share. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.
See our latest analysis for Pilot
Pilot's Projected Earnings Seem Likely To Cover Future Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Pilot was paying only paying out a fraction of earnings, but the payment was a massive 296% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to rise by 9.5% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.
Pilot Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥106.00. This means that it has been growing its distributions at 27% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Pilot May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that Pilot's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Pilot could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Pilot's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Pilot that you should be aware of before investing. Is Pilot 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:7846
Pilot
Manufactures, purchases, and sells writing instruments, and other stationery products and toys in Japan, the Americas, Europe, and Asia.
Flawless balance sheet with reasonable growth potential and pays a dividend.
