Aichi Tokei Denki (TSE:7723) Will Pay A Dividend Of ¥35.00

Aichi Tokei Denki Co., Ltd. (TSE:7723) has announced that it will pay a dividend of ¥35.00 per share on the 24th of June. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Aichi Tokei Denki

Aichi Tokei Denki's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Aichi Tokei Denki was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 2.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 dividend has gone from ¥30.00 total annually to ¥70.00. This means that it has been growing its distributions at 8.8% per annum 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. Aichi Tokei Denki might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

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. Aichi Tokei Denki has seen earnings per share falling at 2.2% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Aichi Tokei Denki's Dividend

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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Aichi Tokei Denki that you should be aware of before investing. Is Aichi Tokei Denki not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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