Acom Co., Ltd. (TSE:8572) will pay a dividend of ¥7.00 on the 24th of June. This takes the annual payment to 3.6% of the current stock price, which is about average for the industry.
Check out our latest analysis for Acom
Acom's Future Dividend Projections Appear Well Covered By Earnings
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. 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 13.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.
Acom Is Still Building Its Track Record
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 dividend has gone from ¥2.00 total annually to ¥14.00. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
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. It's encouraging to see that Acom has been growing its earnings per share at 5.3% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On Acom's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Acom is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Acom (1 is a bit 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.
About TSE:8572
Acom
Offers loans, credit cards, and loan guarantee services in Japan and internationally.
Undervalued with proven track record.
