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

Hosokawa Micron Corporation (TSE:6277) has announced that it will pay a dividend of ¥50.00 per share on the 16th of December. This means that the annual payment will be 2.3% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Hosokawa Micron

Hosokawa Micron's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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 8.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% 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 dividend has gone from ¥30.00 total annually to ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. 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.

Hosokawa Micron Could Grow Its Dividend

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. With a decent amount of growth and a low payout ratio, we think this bodes well for Hosokawa Micron's prospects of growing its dividend payments in the future.

We should note that Hosokawa Micron has issued stock equal to 21% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Hosokawa Micron's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Hosokawa Micron that investors need to be conscious of moving forward. Is Hosokawa Micron not quite the opportunity you were looking for? Why not check out our selection of top 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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