The board of Ain Holdings Inc. (TSE:9627) has announced that it will pay a dividend of ¥60.00 per share on the 31st of July. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for Ain Holdings
Ain Holdings' Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Ain Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 18.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥30.00 in 2014 to the most recent total annual payment of ¥60.00. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ain Holdings might have put its house in order since then, but we remain cautious.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 3.9% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Ain Holdings could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Ain Holdings' Dividend
Overall, we think Ain Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Ain Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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:9627
Ain Holdings
Engages in the dispensing pharmacy, and cosmetic and drug store businesses in Japan.
Flawless balance sheet with proven track record.
