H.U. Group Holdings' (TSE:4544) Dividend Will Be ¥62.00

The board of H.U. Group Holdings, Inc. (TSE:4544) has announced that it will pay a dividend of ¥62.00 per share on the 12th of December. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.

See our latest analysis for H.U. Group Holdings

H.U. Group Holdings Might Find It Hard To Continue The Dividend

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though H.U. Group Holdings is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise by 73.1% over the next year. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥86.00, compared to the most recent full-year payment of ¥125.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.8% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Growth Potential

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. It's encouraging to see that H.U. Group Holdings has been growing its earnings per share at 5.6% a year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 1 warning sign for H.U. Group Holdings that investors need to be conscious of moving forward. Is H.U. Group Holdings 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.

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