SPRIX (TSE:7030) Will Pay A Dividend Of ¥19.00

The board of SPRIX Inc. (TSE:7030) has announced that it will pay a dividend on the 3rd of June, with investors receiving ¥19.00 per share. The dividend yield will be 4.2% based on this payment which is still above the industry average.

See our latest analysis for SPRIX

Estimates Indicate SPRIX's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 21.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 120%, which probably can't continue without putting some pressure on the balance sheet.

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. The dividend has gone from an annual total of ¥30.00 in 2021 to the most recent total annual payment of ¥38.00. This means that it has been growing its distributions at 6.1% per annum 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 Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Over the past five years, it looks as though SPRIX's EPS has declined at around 16% a year. 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of SPRIX's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help SPRIX 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. We don't think that this is a great candidate to be an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for SPRIX that you should be aware of before investing. 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.