AFC-HD AMS Life Science (TSE:2927) Is Due To Pay A Dividend Of ¥16.00

AFC-HD AMS Life Science Co., Ltd. (TSE:2927) has announced that it will pay a dividend of ¥16.00 per share on the 27th of November. This takes the dividend yield to 3.7%, which shareholders will be pleased with.

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AFC-HD AMS Life Science's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. AFC-HD AMS Life Science is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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.

Looking forward, earnings per share could rise by 18.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

View our latest analysis for AFC-HD AMS Life Science

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥32.00. This means that it has been growing its distributions at 12% per annum over that time. AFC-HD AMS Life Science has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that AFC-HD AMS Life Science has been growing its earnings per share at 19% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for AFC-HD AMS Life Science's prospects of growing its dividend payments in the future.

Our Thoughts On AFC-HD AMS Life Science's Dividend

In summary, while it's always good to see the dividend being raised, we don't think AFC-HD AMS Life Science's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think AFC-HD AMS Life Science is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, AFC-HD AMS Life Science has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is AFC-HD AMS Life Science 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.