Hurxley (TSE:7561) Will Pay A Dividend Of ¥13.00

Hurxley Corporation's (TSE:7561) investors are due to receive a payment of ¥13.00 per share on 2nd of December. This takes the dividend yield to 3.6%, which shareholders will be pleased with.

See our latest analysis for Hurxley

Hurxley's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Hurxley was paying a whopping 230% as a dividend, but this only made up 28% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 11.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, 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. Since 2014, the annual payment back then was ¥15.50, compared to the most recent full-year payment of ¥26.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Hurxley might have put its house in order since then, but we remain cautious.

We Could See Hurxley's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hurxley has impressed us by growing EPS at 9.0% per year over the past five years. 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Hurxley will make a great income stock. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Hurxley that investors should take into consideration. Is Hurxley not quite the opportunity you were looking for? Why not check out our selection of top 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.