The board of AXA SA (EPA:CS) has announced that the dividend on 10th of May will be increased to €1.70, which will be 10% higher than last year's payment of €1.54 which covered the same period. This takes the annual payment to 5.4% of the current stock price, which is about average for the industry.
See our latest analysis for AXA
AXA's Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, AXA's dividend was only 50% of earnings, however it was paying out 134% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS is forecast to expand by 23.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.69 in 2013, and the most recent fiscal year payment was €1.54. This means that it has been growing its distributions at 8.4% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. AXA might have put its house in order since then, but we remain cautious.
We Could See AXA's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that AXA has been growing its earnings per share at 5.1% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On AXA's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, AXA has 2 warning signs (and 1 which makes us a bit uncomfortable) 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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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.
About ENXTPA:CS
AXA
Through its subsidiaries, provides insurance, asset management, and banking services worldwide.
Undervalued with solid track record and pays a dividend.
