Axis Co.,Ltd. (TSE:4012) Passed Our Checks, And It's About To Pay A JP¥45.00 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Axis Co.,Ltd. (TSE:4012) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase AxisLtd's shares before the 29th of December to receive the dividend, which will be paid on the 26th of March.

The company's next dividend payment will be JP¥45.00 per share, and in the last 12 months, the company paid a total of JP¥45.00 per share. Looking at the last 12 months of distributions, AxisLtd has a trailing yield of approximately 3.0% on its current stock price of JP¥1509.00. If you buy this business for its dividend, you should have an idea of whether AxisLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AxisLtd paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether AxisLtd generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.

It's positive to see that AxisLtd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for AxisLtd

Click here to see how much of its profit AxisLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at AxisLtd, with earnings per share up 9.9% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AxisLtd has delivered an average of 73% per year annual increase in its dividend, based on the past four years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid AxisLtd? Earnings per share have been growing moderately, and AxisLtd is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and AxisLtd is halfway there. AxisLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks AxisLtd is facing. For example - AxisLtd has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.