Aichi Tokei Denki's (TSE:7723) Dividend Will Be ¥35.00

Aichi Tokei Denki Co., Ltd.'s (TSE:7723) investors are due to receive a payment of ¥35.00 per share on 24th of June. This makes the dividend yield 3.5%, which is above the industry average.

View our latest analysis for Aichi Tokei Denki

Aichi Tokei Denki's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Aichi Tokei Denki's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 2.2% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 45%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥30.00 in 2014 to the most recent total annual payment of ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% 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. Aichi Tokei Denki might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Aichi Tokei Denki is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Aichi Tokei Denki that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.