Alps Alpine's (TSE:6770) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Alps Alpine Co., Ltd. (TSE:6770) has announced that it will be paying its dividend of ¥30.00 on the 2nd of December, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

View our latest analysis for Alps Alpine

Alps Alpine's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Alps Alpine isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS is forecast to rise by 62.0%. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

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 ¥10.00, compared to the most recent full-year payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

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. Alps Alpine's earnings per share has shrunk at 13% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for Alps Alpine that investors should know about before committing capital to this stock. 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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