Avex (TSE:7860) Will Pay A Dividend Of ¥25.00

Avex Inc. (TSE:7860) has announced that it will pay a dividend of ¥25.00 per share on the 12th of June. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

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Avex's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the dividend made up 574% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 36.2% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 914%, which is definitely a bit high to be sustainable going forward.

See our latest analysis for Avex

Avex Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The payments haven't really changed that much since 10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Avex's EPS has fallen by approximately 36% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Avex's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Avex that investors should take into consideration. 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.