Azbil (TSE:6845) Has Announced That It Will Be Increasing Its Dividend To ¥44.00

Azbil Corporation (TSE:6845) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of December to ¥44.00. This will take the annual payment to 2.1% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Azbil

Azbil's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Azbil's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 3.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

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 ¥31.50 in 2014, and the most recent fiscal year payment was ¥88.00. This means that it has been growing its distributions at 11% per annum over that time. Azbil 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Azbil has been growing its earnings per share at 12% a year over the past five years. Azbil definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Azbil's Dividend

Overall, a dividend increase is always good, and we think that Azbil is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for Azbil that you should be aware of before investing. Is Azbil 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com