Autobacs Seven (TSE:9832) Will Pay A Dividend Of ¥30.00

Autobacs Seven Co., Ltd. (TSE:9832) has announced that it will pay a dividend of ¥30.00 per share on the 25th of November. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

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Autobacs Seven's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Autobacs Seven's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 4.9% over the next year. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Autobacs Seven

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 last annual payment of ¥60.00 was flat on the annual payment from10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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 17% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Autobacs Seven's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Autobacs Seven is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Autobacs Seven that investors need to be conscious of moving forward. 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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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.