Akatsuki (TSE:3932) Has Announced A Dividend Of ¥55.00

Akatsuki Inc.'s (TSE:3932) investors are due to receive a payment of ¥55.00 per share on 8th of December. This takes the dividend yield to 3.7%, which shareholders will be pleased with.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Akatsuki's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 183% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 48%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS is forecast to expand by 40.9%. If the dividend continues on its recent course, the payout ratio in 12 months could be 185%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Akatsuki

Akatsuki Is Still Building Its Track Record

It is great to see that Akatsuki has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 7 years was ¥10.00 in 2018, and the most recent fiscal year payment was ¥110.00. This implies that the company grew its distributions at a yearly rate of about 41% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 35% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Akatsuki's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Akatsuki's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Akatsuki 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Akatsuki that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.