Hirogin Holdings (TSE:7337) Will Pay A Dividend Of ¥23.50

Hirogin Holdings, Inc. (TSE:7337) has announced that it will pay a dividend of ¥23.50 per share on the 5th of June. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Hirogin Holdings

Hirogin Holdings' Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Hirogin Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Hirogin Holdings' last earnings report, the payout ratio is at a decent 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 15.8%. If the dividend continues along recent trends, we estimate the future payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥14.00 total annually to ¥47.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. 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 May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 1 warning sign for Hirogin Holdings that investors need to be conscious of moving forward. Is Hirogin Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.