Hokkoku Financial Holdings (TSE:7381) Is Paying Out A Larger Dividend Than Last Year

The board of Hokkoku Financial Holdings, Inc. (TSE:7381) has announced that the dividend on 5th of December will be increased to ¥60.00, which will be 9.1% higher than last year's payment of ¥55.00 which covered the same period. Even though the dividend went up, the yield is still quite low at only 2.1%.

View our latest analysis for Hokkoku Financial Holdings

Hokkoku Financial Holdings' Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Hokkoku Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 32%, which means that Hokkoku Financial Holdings would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share could rise by 5.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥60.00 total annually to ¥110.00. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

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. Hokkoku Financial Holdings has impressed us by growing EPS at 5.7% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Hokkoku Financial Holdings' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Hokkoku Financial Holdings has 2 warning signs (and 1 which is potentially serious) 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.

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