AMBITION DX HOLDINGS (TSE:3300) Is Increasing Its Dividend To ¥25.00

AMBITION DX HOLDINGS Co., Ltd. (TSE:3300) will increase its dividend from last year's comparable payment on the 29th of September to ¥25.00. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.

See our latest analysis for AMBITION DX HOLDINGS

AMBITION DX HOLDINGS' Earnings Easily Cover The Distributions

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.

AMBITION DX HOLDINGS' Dividend Has Lacked Consistency

It's comforting to see that AMBITION DX HOLDINGS has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was ¥4.75, compared to the most recent full-year payment of ¥25.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. AMBITION DX HOLDINGS has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

AMBITION DX HOLDINGS May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.9% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, AMBITION DX HOLDINGS has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On AMBITION DX HOLDINGS' Dividend

In summary, while it's always good to see the dividend being raised, we don't think AMBITION DX HOLDINGS' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. 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.

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