Asahi Kasei (TSE:3407) Will Pay A Dividend Of ¥20.00

Asahi Kasei Corporation (TSE:3407) will pay a dividend of ¥20.00 on the 2nd of December. This makes the dividend yield 3.6%, which is above the industry average.

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Asahi Kasei's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Asahi Kasei was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 13.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Asahi Kasei

Asahi Kasei Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥18.00 total annually to ¥40.00. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Asahi Kasei's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Asahi Kasei has been growing its earnings per share at 5.8% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Asahi Kasei is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Asahi Kasei is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Asahi Kasei that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.