Autobacs Seven (TSE:9832) Has Announced A Dividend Of ¥30.00

The board of Autobacs Seven Co., Ltd. (TSE:9832) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥30.00 per share. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Autobacs Seven

Autobacs Seven's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Autobacs Seven's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 13.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 58%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Autobacs Seven Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥54.00 in 2014, and the most recent fiscal year payment was ¥60.00. This implies that the company grew its distributions at a yearly rate of about 1.1% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Autobacs Seven has been growing its earnings per share at 16% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Autobacs Seven Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Autobacs Seven (of which 1 is concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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