The board of Avantia Co., Ltd. (TSE:8904) has announced that it will pay a dividend of ¥19.00 per share on the 13th of November. The dividend yield will be 4.5% based on this payment which is still above the industry average.
View our latest analysis for Avantia
Avantia's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Avantia's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Over the next year, EPS could expand by 8.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.
Avantia Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The payments haven't really changed that much since 10 years ago. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Avantia Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Avantia has impressed us by growing EPS at 8.4% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Avantia's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Avantia is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
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. Case in point: We've spotted 4 warning signs for Avantia (of which 1 is concerning!) 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.
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About TSE:8904
Average dividend payer slight.
