Hirogin Holdings' (TSE:7337) Dividend Will Be Increased To ¥27.00

Hirogin Holdings, Inc. (TSE:7337) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of December to ¥27.00. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

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Hirogin Holdings' Payment Expected To Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Hirogin Holdings has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Hirogin Holdings' payout ratio of 39% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 13.2% over the next year. If the dividend continues on this path, the future payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Hirogin Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥16.00 in 2015 to the most recent total annual payment of ¥54.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Hirogin Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Hirogin Holdings Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Hirogin Holdings has seen EPS rising for the last five years, at 8.9% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Hirogin Holdings' prospects of growing its dividend payments in the future.

Hirogin Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Hirogin Holdings 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.