The board of Acom Co., Ltd. (TSE:8572) has announced that it will be paying its dividend of ¥7.00 on the 2nd of December, an increased payment from last year's comparable dividend. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.
View our latest analysis for Acom
Acom's Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. Acom is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS is forecast to expand by 12.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.
Acom 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. Since 2018, the annual payment back then was ¥2.00, compared to the most recent full-year payment of ¥14.00. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. 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.
We Could See Acom's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Acom has grown earnings per share at 7.0% per 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
In summary, while it's always good to see the dividend being raised, we don't think Acom's payments are rock solid. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Acom (1 can't be ignored!) that you should be aware of before investing. 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.
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About TSE:8572
Acom
Offers loans, credit cards, and loan guarantee services in Japan and internationally.
Undervalued with proven track record.
