Asahi Songwon Colors' (NSE:ASAHISONG) Dividend Will Be ₹0.50

The board of Asahi Songwon Colors Limited (NSE:ASAHISONG) has announced that it will pay a dividend of ₹0.50 per share on the 28th of October. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Asahi Songwon Colors

Asahi Songwon Colors Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Even in the absence of profits, Asahi Songwon Colors is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Recent, EPS has fallen by 21.2%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was ₹3.50, compared to the most recent full-year payment of ₹0.50. This works out to a decline of approximately 86% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been sinking by 21% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Asahi Songwon Colors' Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Asahi Songwon Colors (of which 2 shouldn't be ignored!) 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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