Hirakawa Hewtech (TSE:5821) Is Paying Out A Larger Dividend Than Last Year

Hirakawa Hewtech Corp.'s (TSE:5821) dividend will be increasing from last year's payment of the same period to ¥22.00 on 9th of December. This makes the dividend yield 3.2%, which is above the industry average.

View our latest analysis for Hirakawa Hewtech

Hirakawa Hewtech's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Hirakawa Hewtech's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 12.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Hirakawa Hewtech Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥11.00 in 2014 to the most recent total annual payment of ¥45.00. This means that it has been growing its distributions at 15% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Hirakawa Hewtech has seen earnings per share falling at 6.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Hirakawa Hewtech's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Hirakawa Hewtech that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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