Adastria (TSE:2685) Will Pay A Dividend Of ¥35.00

Adastria Co., Ltd. (TSE:2685) has announced that it will pay a dividend of ¥35.00 per share on the 23rd of October. This makes the dividend yield 2.9%, which will augment investor returns quite nicely.

View our latest analysis for Adastria

Adastria's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Adastria's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 4.5%. If the dividend continues on this path, the payout ratio could be 28% 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. The annual payment during the last 10 years was ¥60.00 in 2014, and the most recent fiscal year payment was ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Adastria has grown earnings per share at 15% 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.

Adastria Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Adastria that investors need to be conscious of moving forward. Is Adastria not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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