The board of SPRIX Inc. (TSE:7030) has announced that it will pay a dividend on the 25th of December, 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.
See our latest analysis for SPRIX
SPRIX Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was higher than its profits, and made up 83% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.
Looking forward, EPS could fall by 12.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 137%, which could put the dividend under pressure if earnings don't start to improve.
SPRIX Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 4 years was ¥30.00 in 2020, and the most recent fiscal year payment was ¥38.00. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.
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, initial appearances might be deceiving. Earnings per share has been sinking by 12% over the last 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.
SPRIX's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for SPRIX (of which 1 is concerning!) you should know about. Is SPRIX 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.
About TSE:7030
Excellent balance sheet with moderate growth potential.
