Avantia (TSE:8904) Has Affirmed Its Dividend Of ¥19.00

The board of Avantia Co., Ltd. (TSE:8904) has announced that it will pay a dividend on the 12th of November, with investors receiving ¥19.00 per share. This means the annual payment is 4.9% of the current stock price, which is above the average for the industry.

We've discovered 5 warning signs about Avantia. View them for free.

Avantia's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Avantia's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to fall by 25.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 311%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Avantia

Avantia Has A Solid Track Record

The company has an extended history of paying stable dividends. There hasn't been much of a change in the dividend over the last 10 years. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Avantia's earnings per share has shrunk at 26% a year over the past 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Avantia is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 5 warning signs for Avantia (2 are a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.