Aoyama Trading's (TSE:8219) Dividend Will Be ¥55.00

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 will take the annual payment to 6.1% of the stock price, which is above what most companies in the industry pay.

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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 quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

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.

See our latest analysis for Aoyama Trading

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥70.00 total annually to ¥136.00. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

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 Aoyama Trading has grown earnings per share at 65% per year over the past five years. 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.

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 company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Aoyama Trading (1 can't be ignored!) that you should be aware of before investing. 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.