Aoyama Trading (TSE:8219) Will Pay A Dividend Of ¥55.00

Aoyama Trading Co., Ltd.'s (TSE:8219) investors are due to receive a payment of ¥55.00 per share on 27th of November. This makes the dividend yield 5.4%, which is above the industry average.

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Aoyama Trading's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Aoyama Trading was paying out 71% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 1.3%. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Aoyama Trading

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥50.00 in 2015 to the most recent total annual payment of ¥136.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Aoyama Trading has impressed us by growing EPS at 68% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Aoyama Trading hasn't been doing.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Aoyama Trading's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Aoyama Trading has been making. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Aoyama Trading (of which 1 is significant!) you should know about. Is Aoyama Trading 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.