AMBITION DX HOLDINGS' (TSE:3300) Dividend Will Be Increased To ¥25.00

The board of AMBITION DX HOLDINGS Co., Ltd. (TSE:3300) has announced that it will be paying its dividend of ¥25.00 on the 29th of September, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.9%.

See our latest analysis for AMBITION DX HOLDINGS

AMBITION DX HOLDINGS' Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, AMBITION DX HOLDINGS was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 2.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

AMBITION DX HOLDINGS' Dividend Has Lacked Consistency

AMBITION DX HOLDINGS has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was ¥4.75 in 2015, and the most recent fiscal year payment was ¥25.00. This means that it has been growing its distributions at 20% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, AMBITION DX HOLDINGS has only grown its earnings per share at 2.9% per annum over the past five years. While growth may be thin on the ground, AMBITION DX HOLDINGS could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, AMBITION DX HOLDINGS has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about. Is AMBITION DX HOLDINGS not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.