Acom (TSE:8572) Is Due To Pay A Dividend Of ¥10.00

Acom Co., Ltd.'s (TSE:8572) investors are due to receive a payment of ¥10.00 per share on 23rd of June. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

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Acom's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment was quite easily covered by earnings, but it made up 292% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 4.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 71% by next year, which is in a pretty sustainable range.

See our latest analysis for Acom

Acom Doesn't Have A Long Payment History

It is great to see that Acom has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was ¥2.00, compared to the most recent full-year payment of ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 33% 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.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Acom's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Acom's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Acom's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Acom you should be aware of, and 1 of them shouldn't be ignored. Is Acom 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.