EXEO Group, Inc. (TSE:1951) has announced that it will pay a dividend of ¥60.00 per share on the 26th of June. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for EXEO Group
EXEO Group's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, EXEO Group is earning enough to cover the payment, but then it makes up 165% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
The next year is set to see EPS grow by 12.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.
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 implies that the company grew its distributions at a yearly rate of about 17% 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 Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
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. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for EXEO Group that you should be aware of before investing. 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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About TSE:1951
EXEO Group
Engages in telecommunications, civil engineering, construction, electric equipment, system solutions, and renewable energy business in Japan.
Excellent balance sheet average dividend payer.