EXEO Group (TSE:1951) Will Pay A Dividend Of ¥60.00

EXEO Group, Inc. (TSE:1951) will pay a dividend of ¥60.00 on the 26th of June. This makes the dividend yield 3.8%, which is above the industry average.

See our latest analysis for EXEO Group

EXEO Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, EXEO Group's dividend was only 53% of earnings, however it was paying out 165% 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.

The next year is set to see EPS grow by 12.6%. If the dividend continues on this path, the payout ratio could be 57% by next year, which we think can be pretty sustainable going forward.

EXEO Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from ¥24.00 total annually to ¥120.00. This means that it has been growing its distributions at 17% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. EXEO Group's earnings per share has shrunk at 11% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On EXEO Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for EXEO Group that investors should know about before committing capital to this stock. Is EXEO Group not quite the opportunity you were looking for? Why not check out our selection of top 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.