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 annual payment to 1.9% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for AxisLtd
AxisLtd's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, AxisLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
If the trend of the last few years continues, EPS will grow by 2.6% over the next 12 months. 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 Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. 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.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 2.6% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, AxisLtd could always pay out a higher proportion of earnings to increase shareholder returns.
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 payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for AxisLtd 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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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:4012
AxisLtd
Provides research, development, sale, operation, management, investigation, and consultation on computer systems.
Slightly overvalued unattractive dividend payer.
