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

Asahi Kasei Corporation (TSE:3407) has announced that it will pay a dividend of ¥20.00 per share on the 2nd of December. This makes the dividend yield 3.3%, which is above the industry average.

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Asahi Kasei'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. Asahi Kasei was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. 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.

The next year is set to see EPS grow by 14.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

See our latest analysis for Asahi Kasei

Asahi Kasei Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥18.00 in 2015, and the most recent fiscal year payment was ¥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.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Asahi Kasei has impressed us by growing EPS at 5.8% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Asahi Kasei's payments are rock solid. While Asahi Kasei is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Asahi Kasei that investors should take into consideration. 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.