Acom Co., Ltd. (TSE:8572) has announced that it will pay a dividend of ¥7.00 per share on the 24th of June. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.
View our latest analysis for Acom
Acom's Payment Could Potentially Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Acom was earning enough to cover the dividend, but free cash flows weren't positive. 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 13.2%. 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 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 7 years was ¥2.00 in 2017, and the most recent fiscal year payment was ¥14.00. This works out to be a compound annual growth rate (CAGR) of approximately 32% 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
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Acom has grown earnings per share at 5.3% 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
Overall, we always like to see the dividend being raised, but we don't think Acom will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
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. To that end, Acom has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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.
