Airport Facilities' (TSE:8864) Upcoming Dividend Will Be Larger Than Last Year's

Airport Facilities Co., Ltd. (TSE:8864) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of June to ¥19.00. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

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Airport Facilities' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. But before making this announcement, Airport Facilities' earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to expand by 19.6%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 87% which is a bit high but can definitely be sustainable.

See our latest analysis for Airport Facilities

Airport Facilities Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥12.00 total annually to ¥37.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Airport Facilities' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Airport Facilities' payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Airport Facilities has been making. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Airport Facilities that investors should know about before committing capital to this stock. 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.