Japan Airport Terminal (TSE:9706) Is Due To Pay A Dividend Of ¥31.00

The board of Japan Airport Terminal Co., Ltd. (TSE:9706) has announced that it will pay a dividend of ¥31.00 per share on the 9th of December. Even though the dividend went up, the yield is still quite low at only 1.2%.

See our latest analysis for Japan Airport Terminal

Japan Airport Terminal's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Japan Airport Terminal's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 0.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥11.00 in 2014 to the most recent total annual payment of ¥62.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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 Japan Airport Terminal has been growing its earnings per share at 11% a year over the past five years. Japan Airport Terminal definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Japan Airport Terminal Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Japan Airport Terminal has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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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