AMBITION DX HOLDINGS Co., Ltd. (TSE:3300) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of September to ¥25.00. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.
Check out our latest analysis for AMBITION DX HOLDINGS
AMBITION DX HOLDINGS' Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. AMBITION DX HOLDINGS is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share could rise by 2.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥4.75 total annually to ¥25.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
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 EPS growth is quite low, AMBITION DX HOLDINGS has the option to increase the payout ratio to return more cash to shareholders.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think AMBITION DX HOLDINGS' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
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. To that end, AMBITION DX HOLDINGS has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSE:3300
AMBITION DX HOLDINGS
A real estate company, provides property management services in Japan and internationally.
Solid track record with adequate balance sheet.
