AXXZIA (TSE:4936) Will Pay A Dividend Of ¥5.00

The board of AXXZIA Inc. (TSE:4936) has announced that it will pay a dividend on the 9th of October, with investors receiving ¥5.00 per share. Despite the cut, the dividend yield of 2.0% will still be comparable to other companies in the industry.

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AXXZIA's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the company was paying out 184% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 62%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS is forecast to expand by 39.2%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 85% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for AXXZIA

AXXZIA's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of ¥14.00 in 2023 to the most recent total annual payment of ¥10.00. This works out to a decline of approximately 29% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 23% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 4 warning signs for AXXZIA that you should be aware of before investing. 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.