HIRANO TECSEEDLtd (TSE:6245) Will Pay A Dividend Of ¥42.00

The board of HIRANO TECSEED Co.,Ltd. (TSE:6245) has announced that it will pay a dividend of ¥42.00 per share on the 29th of June. However, the dividend yield of 5.5% is still a decent boost to shareholder returns.

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Estimates Indicate HIRANO TECSEEDLtd's Could Struggle to Maintain Dividend Payments In The Future

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, HIRANO TECSEEDLtd was paying out 72% of earnings, but a comparatively small 18% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next 12 months is set to see EPS grow by 7.2%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 146% over the next year.

View our latest analysis for HIRANO TECSEEDLtd

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥84.00. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. HIRANO TECSEEDLtd 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.

Dividend Growth May Be Hard To Achieve

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. HIRANO TECSEEDLtd hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On HIRANO TECSEEDLtd's Dividend

Even though the dividend was cut this year, we think HIRANO TECSEEDLtd has the ability to make consistent payments in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for HIRANO TECSEEDLtd that you should be aware of before investing. 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.