H.U. Group Holdings (TSE:4544) Has Affirmed Its Dividend Of ¥63.00

H.U. Group Holdings, Inc. (TSE:4544) will pay a dividend of ¥63.00 on the 28th of May. The dividend yield will be 4.5% based on this payment which is still above the industry average.

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. H.U. Group Holdings is unprofitable despite paying a dividend, and it is paying out 137% of its free cash flow. These payout levels would generally be quite difficult to keep up.

Looking forward, earnings per share is forecast to rise by 88.0% 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 can be done in short order, the dividend might be difficult to sustain.

Check out our latest analysis for H.U. Group Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥92.00 total annually to ¥125.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. H.U. Group Holdings' earnings per share has shrunk at 20% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of H.U. Group Holdings' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help H.U. Group Holdings make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. 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.