audius (FRA:3ITN) Has Announced That Its Dividend Will Be Reduced To €0.20

The board of audius SE (FRA:3ITN) has announced it will be reducing its dividend by 43% from last year's payment of €0.35 on the 30th of June, with shareholders receiving €0.20. However, the dividend yield of 3.1% is still a decent boost to shareholder returns.

We've discovered 3 warning signs about audius. View them for free.

audius' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, audius' dividend made up quite a large proportion of earnings but only of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 100.0% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 28% which would be quite comfortable going to take the dividend forward.

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audius Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from €0.17 total annually to €0.35. This means that it has been growing its distributions at 20% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that audius' earnings per share has fallen at approximately 7.0% per year over the past three years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for audius 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.