The board of Aucnet Inc. (TSE:3964) has announced that it will pay a dividend on the 4th of September, with investors receiving ¥28.00 per share. Based on this payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.
See our latest analysis for Aucnet
Aucnet's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Aucnet'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.
If the trend of the last few years continues, EPS will grow by 24.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.
Aucnet's Dividend Has Lacked Consistency
Looking back, Aucnet's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was ¥26.00 in 2017, and the most recent fiscal year payment was ¥49.00. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Aucnet might have put its house in order since then, but we remain cautious.
The Dividend Looks Likely To Grow
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. We are encouraged to see that Aucnet has grown earnings per share at 24% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Aucnet Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Aucnet that investors should know about before committing capital to this stock. Is Aucnet 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:3964
Flawless balance sheet and good value.
