SUNNEXTA GROUP Inc. (TSE:8945) will pay a dividend of ¥19.00 on the 27th of September. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.
View our latest analysis for SUNNEXTA GROUP
SUNNEXTA GROUP's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, SUNNEXTA GROUP's was paying out quite a large proportion of earnings and 81% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.
Looking forward, could fall by 5.3% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 92%, meaning that most of the company's earnings is being paid out to shareholders.
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 ¥9.50 in 2014, and the most recent fiscal year payment was ¥38.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth May Be Hard To Come By
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that SUNNEXTA GROUP's earnings per share has fallen at approximately 5.3% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On SUNNEXTA GROUP's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. We don't think SUNNEXTA GROUP is a great stock to add to your portfolio if income is your focus.
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. Taking the debate a bit further, we've identified 2 warning signs for SUNNEXTA GROUP 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.
About TSE:8945
Flawless balance sheet 6 star dividend payer.
