Hokuetsu Industries' (TSE:6364) Dividend Will Be ¥20.00

The board of Hokuetsu Industries Co., Ltd. (TSE:6364) has announced that it will pay a dividend of ¥20.00 per share on the 1st of July. However, the dividend yield of 2.0% still remains in a typical range for the industry.

See our latest analysis for Hokuetsu Industries

Hokuetsu Industries' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Hokuetsu Industries was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 12.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥40.00. This means that it has been growing its distributions at 15% per annum 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.

We Could See Hokuetsu Industries' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Hokuetsu Industries has impressed us by growing EPS at 6.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Hokuetsu Industries' prospects of growing its dividend payments in the future.

In Summary

Even though the dividend was cut this year, we think Hokuetsu Industries 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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Hokuetsu Industries 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.