Alps Alpine (TSE:6770) Is Reducing Its Dividend To ¥10.00

Alps Alpine Co., Ltd. (TSE:6770) has announced that on 26th of June, it will be paying a dividend of¥10.00, which a reduction from last year's comparable dividend. However, the dividend yield of 1.8% is still a decent boost to shareholder returns.

View our latest analysis for Alps Alpine

Alps Alpine Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Despite not generating a profit, Alps Alpine is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Earnings per share is forecast to rise by 111.5% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 196%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥10.00 total annually to ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Alps Alpine might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Alps Alpine's earnings per share has fallen at approximately 5.4% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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.

We're Not Big Fans Of Alps Alpine's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Alps Alpine that investors should take into consideration. Is Alps Alpine not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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