Avant Group (TSE:3836) Is Paying Out A Larger Dividend Than Last Year

The board of Avant Group Corporation (TSE:3836) has announced that it will be paying its dividend of ¥25.00 on the 26th of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.4%, which is fairly typical for the industry.

See our latest analysis for Avant Group

Avant Group's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Avant Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 17.3% over the next year. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥2.13, compared to the most recent full-year payment of ¥25.00. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. It's encouraging to see that Avant Group has been growing its earnings per share at 20% a year over the past five years. Avant Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Avant Group's Dividend

Overall, a dividend increase is always good, and we think that Avant Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an 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. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Avant Group stock. Is Avant Group 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.