SPRIX Inc. (TSE:7030) will pay a dividend of ¥19.00 on the 25th of December. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.
See our latest analysis for SPRIX
SPRIX Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. SPRIX was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
If the company can't turn things around, EPS could fall by 8.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 103%, which could put the dividend under pressure if earnings don't start to improve.
SPRIX Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the dividend has gone from ¥30.00 total annually to ¥38.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. SPRIX has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
Dividend Growth Is Doubtful
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. SPRIX has seen earnings per share falling at 8.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
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 hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think SPRIX is a great stock to add to your portfolio if income is your focus.
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. To that end, SPRIX has 4 warning signs (and 1 which is concerning) we think 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.
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About TSE:7030
Excellent balance sheet with moderate growth potential.
