Pack (TSE:3950) Has Affirmed Its Dividend Of ¥22.00

The Pack Corporation's (TSE:3950) investors are due to receive a payment of ¥22.00 per share on 27th of March. The dividend yield will be 3.4% based on this payment which is still above the industry average.

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Pack's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Pack's dividend was only 41% of earnings, however it was paying out 232% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to grow by 9.1% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Pack

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 ¥16.67 in 2015 to the most recent total annual payment of ¥41.33. This means that it has been growing its distributions at 9.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Pack Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Pack has been growing its earnings per share at 9.1% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Pack is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Pack that investors need to be conscious of moving forward. Is Pack 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.