ASKUL (TSE:2678) Will Pay A Dividend Of ¥19.00
ASKUL Corporation (TSE:2678) will pay a dividend of ¥19.00 on January 20, yielding 2.3%. While the company has a solid track record of stable dividends, concerns arise due to a lack of free cash flow, which may affect future payments. EPS is forecasted to grow by 8.1%, with a potential payout ratio of 44% next year. Despite the reliable dividend growth, investors should be cautious and consider other factors before investing, as there are warning signs regarding sustainability.
ASKUL Corporation (TSE:2678) will pay a dividend of ¥19.00 on the 20th of January. This makes the dividend yield 2.3%, which will augment investor returns quite nicely.
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ASKUL's Payment Could Potentially Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, ASKUL was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Over the next year, EPS is forecast to expand by 8.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.
See our latest analysis for ASKUL
ASKUL Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥15.00 in 2015 to the most recent total annual payment of ¥38.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.7% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
We Could See ASKUL's Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. ASKUL has seen EPS rising for the last five years, at 7.5% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ASKUL's payments, as there could be some issues with sustaining them into the future. While ASKUL is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
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. Taking the debate a bit further, we've identified 2 warning signs for ASKUL that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
