AIT (TSE:9381) Is Due To Pay A Dividend Of ¥40.00

AIT Corporation's (TSE:9381) investors are due to receive a payment of ¥40.00 per share on 23rd of May. Based on this payment, the dividend yield on the company's stock will be 4.7%, which is an attractive boost to shareholder returns.

View our latest analysis for AIT

AIT's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 95% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 60%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS could expand by 16.4% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 62% which brings it into quite a comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥80.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. AIT 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.

AIT Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. AIT has seen EPS rising for the last five years, at 16% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for AIT that you should be aware of before investing. Is AIT 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.