ASKA Pharmaceutical HoldingsLtd (TSE:4886) Is Due To Pay A Dividend Of ¥25.00

The board of ASKA Pharmaceutical Holdings Co.,Ltd. (TSE:4886) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥25.00 per share. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.

View our latest analysis for ASKA Pharmaceutical HoldingsLtd

ASKA Pharmaceutical HoldingsLtd's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, ASKA Pharmaceutical HoldingsLtd's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 4.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

ASKA Pharmaceutical HoldingsLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥14.00 in 2015 to the most recent total annual payment of ¥50.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that ASKA Pharmaceutical HoldingsLtd has grown earnings per share at 54% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On ASKA Pharmaceutical HoldingsLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think ASKA Pharmaceutical HoldingsLtd will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 1 warning sign for ASKA Pharmaceutical HoldingsLtd that investors need to be conscious of moving forward. Is ASKA Pharmaceutical HoldingsLtd 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.