UACJ (TSE:5741) Is Due To Pay A Dividend Of ¥80.00

UACJ Corporation (TSE:5741) has announced that it will pay a dividend of ¥80.00 per share on the 2nd of December. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.

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UACJ's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, UACJ's earnings easily covered the dividend, but free cash flows were negative. 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.

Over the next year, EPS is forecast to expand by 4.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for UACJ

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥60.00, compared to the most recent full-year payment of ¥160.00. This means that it has been growing its distributions at 10% per annum over that time. UACJ 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. UACJ has seen EPS rising for the last five years, at 71% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While UACJ is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 2 warning signs for UACJ (of which 1 is a bit concerning!) you should know about. Is UACJ 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.