Avant Group's (TSE:3836) Upcoming Dividend Will Be Larger Than Last Year's

Avant Group Corporation (TSE:3836) will increase its dividend from last year's comparable payment on the 30th of September to ¥19.00. The payment will take the dividend yield to 1.4%, which is in line with the average for the industry.

See our latest analysis for Avant Group

Avant Group's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Avant Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 21.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2014, the annual payment back then was ¥1.63, compared to the most recent full-year payment of ¥19.00. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. Avant Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Avant Group has impressed us by growing EPS at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Avant Group's prospects of growing its dividend payments in the future.

Avant Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings 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.

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