Affine Investments Limited (JSE:ANI) is due to pay a dividend of ZAR0.205 on June 24th, which means the annual payout will be 8.3% of the current share price, in line with the industry average.
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Affine Investments pays out more in dividends than it earns
While it’s always good to see a stable dividend yield, you also need to consider whether the payments are viable. Based on the last payment, Afine Investments’ profits didn’t cover the dividend, but it generated enough cash instead. In general, we believe cash is more important than accounting profit measures, so given that cash flow is easily covering the dividend, we don’t see much reason to worry.
If recent trends continue, EPS is expected to decrease by 75.6% over the next 12 months.If dividends continue along recent trends, the payout ratio is expected to reach 421%, although the dividend could be in jeopardy if the company’s earnings do not improve.
Affine Investments’ dividends have been inconsistent
Looking back, the company hasn’t been the most consistent in paying dividends, but with such a short dividend history it may be too early to draw any firm conclusions. Starting in 2022, the annualized payment at that time was ZAR0.556, while the most recent annualized payment was ZAR0.411. This represents a decrease of about 26% over that period. Companies with decreasing dividends over time are generally not what we look for.
Dividend growth potential is limited
With a relatively unstable dividend and a bad history of declining dividends, it’s even more important to see if EPS are growing. Afine Investments’ earnings per share fell 76% over the past year, and a declining dividend is a common outcome when earnings are falling. However, keep in mind that one year is too short to draw any firm conclusions about a company’s future prospects.
Affine Investments’ dividend does not seem sustainable.
In summary, it is not ideal to see the dividend cut, but the company could lower the dividend to a more sustainable range. The dividend is not particularly stable and does not show great growth potential, but it could be reliable in the short term as the dividend is well covered by cash flow. The company is not in the top tier of income-generating stocks.
Market movements have proven how a consistent dividend policy is valued more than an unpredictable one. However, despite the importance of dividends, they are not the only factor readers should know when evaluating a company. For example, we have looked at companies such as: 5 warning signs for Affin Investments These are points that investors should consider. Is Afine Investments the opportunity you have been looking for? A selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
