Aiful (TSE:8515) Has Announced A Dividend Of ¥6.00

The board of Aiful Corporation (TSE:8515) has announced that it will pay a dividend of ¥6.00 per share on the 5th of June. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

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Aiful's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Aiful is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 9.6%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Aiful

Aiful Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was ¥1.00 in 2020, and the most recent fiscal year payment was ¥12.00. This works out to be a compound annual growth rate (CAGR) of approximately 64% a year over that time. Aiful has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Aiful has impressed us by growing EPS at 37% 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.

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Aiful has 2 warning signs (and 1 which is significant) we think you should know about. Is Aiful 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.