Hokkoku Financial Holdings' (TSE:7381) Dividend Will Be ¥60.00

Hokkoku Financial Holdings, Inc. (TSE:7381) will pay a dividend of ¥60.00 on the 27th of May. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.

Hokkoku Financial Holdings' Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Hokkoku Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Hokkoku Financial Holdings' latest earnings report puts its payout ratio at 19%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS could expand by 0.5% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Hokkoku Financial Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥120.00. This means that it has been growing its distributions at 7.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Hokkoku Financial Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Hokkoku Financial Holdings has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Hokkoku Financial Holdings' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Hokkoku Financial Holdings has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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.