Hokuetsu Industries (TSE:6364) Has Affirmed Its Dividend Of ¥20.00

The board of Hokuetsu Industries Co., Ltd. (TSE:6364) has announced that it will pay a dividend on the 4th of December, with investors receiving ¥20.00 per share. The dividend yield will be 3.0% based on this payment which is still above the industry average.

Check out our latest analysis for Hokuetsu Industries

Hokuetsu Industries' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. But before making this announcement, Hokuetsu Industries' earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 89% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share is forecast to rise by 11.8% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥15.00 in 2014, and the most recent fiscal year payment was ¥57.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hokuetsu Industries has seen EPS rising for the last five years, at 7.5% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Hokuetsu Industries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hokuetsu Industries' payments, as there could be some issues with sustaining them into the future. While Hokuetsu Industries is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Hokuetsu Industries that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.