Rix's (TSE:7525) Dividend Will Be ¥64.00
Rix Corporation (TSE:7525) will pay a dividend of ¥64.00 per share on December 9, yielding 4.4%. While the company covers the payment with earnings, it represents 107% of cash flows, raising concerns about sustainability. Rix's dividend history shows instability, with past cuts, but EPS has grown 9.4% annually over five years. Despite potential growth, the company may not be a reliable income stock due to cash flow issues and a volatile dividend history. Investors should be cautious and consider other dividend stocks.
The board of Rix Corporation (TSE:7525) has announced that it will pay a dividend of ¥64.00 per share on the 9th of December. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.
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Rix's Payment Could Potentially Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Rix is earning enough to cover the payment, but then it makes up 107% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Over the next year, EPS could expand by 9.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Rix
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥23.00 in 2015 to the most recent total annual payment of ¥146.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Has 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. We are encouraged to see that Rix has grown earnings per share at 9.4% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Rix's Dividend
Overall, we always like to see the dividend being raised, but we don't think Rix will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Rix that investors need to be conscious of moving forward. Is Rix not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
