Astellas Pharma (TSE:4503) Has Announced That It Will Be Increasing Its Dividend To ¥37.00

Astellas Pharma Inc. (TSE:4503) will increase its dividend from last year's comparable payment on the 2nd of December to ¥37.00. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Astellas Pharma

Astellas Pharma Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 583% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next 12 months is set to see EPS grow by 30.7%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Astellas Pharma Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥27.00, compared to the most recent full-year payment of ¥74.00. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Astellas Pharma's earnings per share has shrunk at 37% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Astellas Pharma's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Astellas Pharma will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Astellas Pharma (of which 2 are a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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