Arclands' (TSE:9842) Dividend Will Be ¥20.00

The board of Arclands Corporation (TSE:9842) has announced that it will pay a dividend of ¥20.00 per share on the 1st of June. The dividend yield will be 2.1% based on this payment which is still above the industry average.

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Arclands' 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. However, prior to this announcement, Arclands' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 7.3%. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Arclands

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥18.00, compared to the most recent full-year payment of ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Arclands' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Arclands' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Arclands' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Arclands that investors need to be conscious of moving forward. 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.