SUNNEXTA GROUP (TSE:8945) Has Announced A Dividend Of ¥21.00

The board of SUNNEXTA GROUP Inc. (TSE:8945) has announced that it will pay a dividend on the 5th of March, with investors receiving ¥21.00 per share. This makes the dividend yield 4.1%, which is above the industry average.

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SUNNEXTA GROUP's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, SUNNEXTA GROUP was paying out 206% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

EPS is set to fall by 15.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 223%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for SUNNEXTA GROUP

SUNNEXTA GROUP Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥13.00 in 2015, and the most recent fiscal year payment was ¥42.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though SUNNEXTA GROUP's EPS has declined at around 15% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

SUNNEXTA GROUP's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for SUNNEXTA GROUP you should be aware of, and 2 of them are a bit unpleasant. 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.