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audius SE's (FRA:3ITN) dividend is being reduced by 43% to €0.20 per share on 30th of June, in comparison to last year's comparable payment of €0.35. The yield is still above the industry average at 3.2%.
We've discovered 3 warning signs about audius. View them for free.
audius' Future Dividend Projections Appear Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 80% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.
Looking forward, earnings per share is forecast to rise by 88.6% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 29% which would be quite comfortable going to take the dividend forward.
View our latest analysis for audius
audius Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The annual payment during the last 4 years was €0.17 in 2021, and the most recent fiscal year payment was €0.35. This means that it has been growing its distributions at 20% per annum over that time. audius has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth May Be Hard To Come By
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past three years, it looks as though audius' EPS has declined at around 7.0% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for audius that investors need to be conscious of moving forward. 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.