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

AXXZIA Inc.'s (TSE:4936) investors are due to receive a payment of ¥5.00 per share on 9th of October. The dividend yield will be in the average range for the industry at 2.0%.

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AXXZIA's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, AXXZIA's dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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.

EPS is set to grow by 39.2% over the next year. 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.

See our latest analysis for AXXZIA

AXXZIA's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2023, the dividend has gone from ¥14.00 total annually to ¥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.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. AXXZIA's earnings per share has shrunk at 23% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

AXXZIA's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for AXXZIA that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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