AxisLtd (TSE:4012) Is Increasing Its Dividend To ¥25.00

Axis Co.,Ltd. (TSE:4012) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of March to ¥25.00. This will take the dividend yield to an attractive 1.9%, providing a nice boost to shareholder returns.

See our latest analysis for AxisLtd

AxisLtd's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, AxisLtd's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 2.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

AxisLtd Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of ¥5.00 in 2021 to the most recent total annual payment of ¥25.00. This means that it has been growing its distributions at 71% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, AxisLtd has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On AxisLtd's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for AxisLtd that investors need to be conscious of moving forward. Is AxisLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.