Aoyama Trading (TSE:8219) Has Announced A Dividend Of ¥55.00

The board of Aoyama Trading Co., Ltd. (TSE:8219) has announced that it will pay a dividend of ¥55.00 per share on the 27th of November. This takes the dividend yield to 5.9%, which shareholders will be pleased with.

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Aoyama Trading's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by Aoyama Trading's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 79% indicates it is more focused on returning cash to shareholders than growing the business.

EPS is set to fall by 2.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 77%, which is definitely on the higher side.

Check out our latest analysis for Aoyama Trading

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥70.00 in 2015, and the most recent fiscal year payment was ¥136.00. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Aoyama Trading might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Aoyama Trading has seen EPS rising for the last five years, at 65% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Aoyama Trading could prove to be a strong dividend payer.

Our Thoughts On Aoyama Trading's Dividend

Overall, we always like to see the dividend being raised, but we don't think Aoyama Trading will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Aoyama Trading you should be aware of, and 1 of them makes us a bit uncomfortable. 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.