Pilot (TSE:7846) Is Increasing Its Dividend To ¥53.00

Pilot Corporation (TSE:7846) will increase its dividend from last year's comparable payment on the 2nd of September to ¥53.00. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Pilot

Pilot's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Pilot was paying only paying out a fraction of earnings, but the payment was a massive 470% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Unless the company can turn things around, EPS could fall by 2.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Pilot Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥10.00 in 2014 to the most recent total annual payment of ¥106.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Pilot's EPS has declined at around 2.1% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Pilot's Dividend

Overall, we always like to see the dividend being raised, but we don't think Pilot will make a great income stock. While Pilot is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 Pilot 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.

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