Hokuetsu Industries (TSE:6364) Will Pay A Dividend Of ¥20.00

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.

Check out our latest analysis for Hokuetsu Industries

Hokuetsu Industries' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Hokuetsu Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 12.8%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2014 to the most recent total annual payment of ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Hokuetsu Industries 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.

We Could See Hokuetsu Industries' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Hokuetsu Industries has been growing its earnings per share at 6.1% a 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.

Our Thoughts On Hokuetsu Industries' Dividend

Overall, we think that Hokuetsu Industries could make a reasonable income stock, even though it did cut the dividend this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Hokuetsu Industries that investors should know about before committing capital to this stock. Is Hokuetsu Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.