Appirits (TSE:4174) Is Due To Pay A Dividend Of ¥8.00

Appirits Inc. (TSE:4174) has announced that it will pay a dividend of ¥8.00 per share on the 11th of April. This will take the annual payment to 2.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Appirits

Appirits' Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 101% of what it was earning and 90% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

EPS is set to fall by 13.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 131%, which could put the dividend in jeopardy if the company's earnings don't improve.

Appirits Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was ¥5.00 in 2023, and the most recent fiscal year payment was ¥16.00. This means that it has been growing its distributions at 79% per annum over that time. Appirits has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Appirits' EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Appirits will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 4 warning signs for Appirits you should be aware of, and 1 of them shouldn't be ignored. 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.