Laox HoldingsLTD's (TSE:8202) Upcoming Dividend Will Be Larger Than Last Year's

The board of Laox Holdings CO.,LTD. (TSE:8202) has announced that it will be paying its dividend of ¥3.00 on the 16th of March, an increased payment from last year's comparable dividend. This will take the annual payment to 1.7% of the stock price, which is above what most companies in the industry pay.

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Laox HoldingsLTD's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Laox HoldingsLTD is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

If the trend of the last few years continues, EPS will grow by 72.6% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

View our latest analysis for Laox HoldingsLTD

Laox HoldingsLTD Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Laox HoldingsLTD has grown earnings per share at 73% per year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Laox HoldingsLTD's payments are rock solid. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Laox HoldingsLTD that investors should know about before committing capital to this stock. 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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