The board of Pilot Corporation (TSE:7846) has announced that it will pay a dividend of ¥53.00 per share on the 31st of March. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.
View our latest analysis for Pilot
Pilot's Payment Could Potentially Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Pilot's dividend was only 15% of earnings, however it was paying out 298% of free 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.
Over the next year, EPS is forecast to expand by 10.6%. If the dividend continues on this path, the payout ratio could be 36% 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. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥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.
Dividend Growth May Be Hard To Achieve
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 EPS growth is quite low, Pilot has the option to increase the payout ratio to return more cash to shareholders.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good 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 example, we've picked out 1 warning sign for Pilot that investors should know about before committing capital to this stock. 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.
