Afine Investments (JSE:ANI) Has Announced That Its Dividend Will Be Reduced To ZAR0.206

Afine Investments Limited's (JSE:ANI) dividend is being reduced from last year's payment covering the same period to ZAR0.206 on the 26th of June. This means that the annual payment is 4.6% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Afine Investments

Afine Investments Doesn't Earn Enough To Cover Its Payments

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Afine Investments' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 90.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 959%, which could put the dividend under pressure if earnings don't start to improve.

Afine Investments Doesn't Have A Long Payment History

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 Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the last year, Afine Investments' EPS has fallen by 91%. Such a large drop can indicate that the business has run into some trouble and might end up in the dividend having to be reduced. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

We should note that Afine Investments has issued stock equal to 13% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Afine Investments' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 5 warning signs for Afine Investments you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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