The board of Asante Incorporated (TSE:6073) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥31.00 per share. The dividend yield will be 3.6% based on this payment which is still above the industry average.
Check out our latest analysis for Asante
Asante Is Paying Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
If the company can't turn things around, EPS could fall by 11.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 142%, which is definitely a bit high to be sustainable going forward.
Asante Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was ¥60.00 in 2020, and the most recent fiscal year payment was ¥62.00. Its dividends have grown at less than 1% per annum over this time frame. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. 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.
Asante's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Asante make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Asante (of which 2 don't sit too well with us!) you should know about. Is Asante 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.
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About TSE:6073
Excellent balance sheet with limited growth.
