Anritsu (TSE:6754) Will Pay A Dividend Of ¥20.00

The board of Anritsu Corporation (TSE:6754) has announced that it will pay a dividend of ¥20.00 per share on the 5th of December. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Anritsu

Anritsu's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Anritsu's dividend made up quite a large proportion of earnings but only 41% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 12.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 67% which would be quite comfortable going to take the dividend 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. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

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. Over the past five years, it looks as though Anritsu's EPS has declined at around 2.2% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Anritsu's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Anritsu's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Anritsu that you should be aware of before investing. 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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