AIT Corporation (TSE:9381) has announced that it will pay a dividend of ¥40.00 per share on the 28th of October. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.
Check out our latest analysis for AIT
AIT's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, AIT's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
If the trend of the last few years continues, EPS will grow by 16.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 61% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥16.00 in 2014, and the most recent fiscal year payment was ¥80.00. This means that it has been growing its distributions at 17% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
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. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
AIT Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think AIT might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
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 AIT that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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About TSE:9381
AIT
Operates as a comprehensive logistics company primarily in China and Southeast Asia.
Flawless balance sheet average dividend payer.
