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 will take the annual payment to 5.6% of the stock price, which is above what most companies in the industry pay.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Hoosiers Holdings' Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Hoosiers Holdings' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 5.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Hoosiers Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. 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. Hoosiers Holdings 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hoosiers Holdings has seen EPS rising for the last five years, at 107% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Hoosiers Holdings could prove to be a strong dividend payer.

We should note that Hoosiers Holdings has issued stock equal to 12% 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 Hoosiers Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Hoosiers Holdings (1 is concerning!) that you should be aware of before investing. Is Hoosiers Holdings 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.