AxisLtd's (TSE:4012) Upcoming Dividend Will Be Larger Than Last Year's

Axis Co.,Ltd. (TSE:4012) will increase its dividend from last year's comparable payment on the 26th of March to ¥45.00. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

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AxisLtd's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, AxisLtd was easily earning enough to 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 11.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

See our latest analysis for AxisLtd

AxisLtd Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was ¥5.00 in 2021, and the most recent fiscal year payment was ¥45.00. This works out to be a compound annual growth rate (CAGR) of approximately 73% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that AxisLtd has been growing its earnings per share at 11% a year over the past five years. AxisLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like AxisLtd's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for AxisLtd that investors should know about before committing capital to this stock. 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.