Asukanet (TSE:2438) Is Paying Out A Dividend Of ¥7.00
Asukanet Co., Ltd. (TSE:2438) will pay a dividend of ¥7.00 on the 30th of July. This means the dividend yield will be fairly typical at 2.0%.
Asukanet's Distributions May Be Difficult To Sustain
Solid dividend yields are great, but they only really help us if the payment is sustainable. While Asukanet is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Over the next year, EPS might fall by 19.9% based on recent performance. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.
See our latest analysis for Asukanet
Asukanet's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of ¥10.00 in 2016 to the most recent total annual payment of ¥7.00. Doing the maths, this is a decline of about 3.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 20% over the last five years. 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 don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Asukanet has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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