Asukanet's (TSE:2438) Dividend Will Be ¥7.00

The board of Asukanet Co., Ltd. (TSE:2438) has announced that it will pay a dividend of ¥7.00 per share on the 30th of July. This means the dividend yield will be fairly typical at 1.9%.

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Asukanet's Distributions May Be Difficult To Sustain

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Asukanet isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. 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.

EPS has fallen by an average of 26.7% in the past, so this could continue over the next year. 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.

Check out our latest analysis for Asukanet

Asukanet's Dividend Has Lacked Consistency

Asukanet has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥7.00. This works out to be a decline of approximately 3.9% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Asukanet's EPS has fallen by approximately 27% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Asukanet's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Asukanet (of which 1 is a bit concerning!) you should know about. Is Asukanet not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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