Acom (TSE:8572) Has Announced That It Will Be Increasing Its Dividend To ¥7.00

Acom Co., Ltd.'s (TSE:8572) dividend will be increasing from last year's payment of the same period to ¥7.00 on 2nd of December. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

See our latest analysis for Acom

Acom's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Acom's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 12.8%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Acom Is Still Building Its Track Record

Acom's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 6 years was ¥2.00 in 2018, and the most recent fiscal year payment was ¥14.00. This works out to be a compound annual growth rate (CAGR) of approximately 38% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Acom Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Acom has impressed us by growing EPS at 7.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Acom's prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Acom will make a great income stock. While Acom is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Acom (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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