Hoosiers Holdings (TSE:3284) Is Increasing Its Dividend To ¥37.00

The board of Hoosiers Holdings Co., Ltd. (TSE:3284) has announced that it will be paying its dividend of ¥37.00 on the 4th of December, an increased payment from last year's comparable dividend. This makes the dividend yield 5.7%, which is above the industry average.

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Hoosiers Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Hoosiers Holdings was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 7.2%. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Hoosiers Holdings

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 ¥14.00 in 2015 to the most recent total annual payment of ¥74.00. This means that it has been growing its distributions at 18% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Hoosiers Holdings has grown earnings per share at 100% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Hoosiers Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Hoosiers Holdings (of which 1 makes us a bit uncomfortable!) you should know about. 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.