Achilles' (TSE:5142) Shareholders Will Receive A Smaller Dividend Than Last Year

Achilles Corporation's (TSE:5142) dividend is being reduced by 50% to ¥20.00 per share on 1st of July, in comparison to last year's comparable payment of ¥40.00. The dividend yield will be in the average range for the industry at 2.7%.

See our latest analysis for Achilles

Achilles' Distributions May Be Difficult To Sustain

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Even though Achilles is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Recent, EPS has fallen by 44.1%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Achilles Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥40.00. This means that it has been growing its distributions at 2.9% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Achilles' EPS has declined at around 44% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the current distribution levels might be a bit unsustainable, we can't deny that until now it has been very stable. We don't think Achilles 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Achilles that investors need to be conscious of moving forward. 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.