Acom's (TSE:8572) Dividend Will Be ¥7.00

Acom Co., Ltd.'s (TSE:8572) investors are due to receive a payment of ¥7.00 per share on 24th of June. Based on this payment, the dividend yield for the company will be 3.5%, which is fairly typical for the industry.

See our latest analysis for Acom

Acom's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Acom is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 12.2%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Acom Doesn't Have A Long Payment History

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 2018, and the most recent fiscal year payment was ¥14.00. This means that it has been growing its distributions at 32% per annum 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.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Acom has been growing its earnings per share at 5.5% a year over the past five years. Acom definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

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. We don't think Acom is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 makes us a bit uncomfortable!) 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.