Hosokawa Micron (TSE:6277) Will Pay A Dividend Of ¥50.00

The board of Hosokawa Micron Corporation (TSE:6277) has announced that it will pay a dividend on the 16th of December, with investors receiving ¥50.00 per share. This means the dividend yield will be fairly typical at 2.1%.

Check out our latest analysis for Hosokawa Micron

Hosokawa Micron's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Hosokawa Micron's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 9.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥100.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Hosokawa Micron has been growing its earnings per share at 6.6% a year over the past five years. Hosokawa Micron definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Hosokawa Micron's Dividend

Overall, a consistent dividend is a good thing, and we think that Hosokawa Micron has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Hosokawa Micron that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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