Astellas Pharma (TSE:4503) Will Pay A Dividend Of ¥39.00

The board of Astellas Pharma Inc. (TSE:4503) has announced that it will pay a dividend of ¥39.00 per share on the 3rd of June. This makes the dividend yield 3.7%, which is above the industry average.

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Astellas Pharma's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Astellas Pharma's dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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.

The next 12 months is set to see EPS grow by 1.5%. If the dividend continues on its recent course, the payout ratio in 12 months could be 121%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Astellas Pharma

Astellas Pharma 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 ¥28.00 in 2015 to the most recent total annual payment of ¥78.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. However, Astellas Pharma's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Astellas Pharma's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Astellas Pharma's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Astellas Pharma 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.

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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.