ABC-Mart,Inc. (TSE:2670) is reducing its dividend from last year's comparable payment to ¥33.00 on the 13th of November. The dividend yield of 2.4% is still a nice boost to shareholder returns, despite the cut.
See our latest analysis for ABC-MartInc
ABC-MartInc's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, ABC-MartInc's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 2.8%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥16.67 total annually to ¥66.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
We Could See ABC-MartInc's Dividend Growing
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. ABC-MartInc has impressed us by growing EPS at 6.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In Summary
Overall, we think that ABC-MartInc could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for ABC-MartInc that you should be aware of before investing. 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.
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About TSE:2670
ABC-MartInc
Engages in the retailing of shoes, clothing, and general merchandise products for men, women, and kids in Japan.
Flawless balance sheet with solid track record and pays a dividend.
