Howa Machinery (TSE:6203) Is Due To Pay A Dividend Of ¥20.00

The board of Howa Machinery, Ltd. (TSE:6203) has announced that it will pay a dividend of ¥20.00 per share on the 27th of June. This payment means that the dividend yield will be 1.8%, which is around the industry average.

See our latest analysis for Howa Machinery

Howa Machinery's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Howa Machinery's Could Struggle to Maintain Dividend Payments In The Future

Howa Machinery's Future Dividends May Potentially Be At Risk

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Despite not generating a profit, Howa Machinery is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

The next 12 months is set to see EPS grow by 119.5%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Howa Machinery 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 last annual payment of ¥20.00 was flat on the annual payment from10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Howa Machinery's EPS has fallen by approximately 37% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Howa Machinery's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Howa Machinery that you should be aware of before investing. Is Howa Machinery not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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