Pack (TSE:3950) Has Announced A Dividend Of ¥22.00

The board of The Pack Corporation (TSE:3950) has announced that it will pay a dividend on the 27th of March, with investors receiving ¥22.00 per share. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

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Pack's 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. Based on the last dividend, Pack is earning enough to cover the payment, but then it makes up 232% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS could expand by 9.1% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 78%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

See 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 annual payment during the last 10 years was ¥16.67 in 2015, and the most recent fiscal year payment was ¥41.33. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Pack might have put its house in order since then, but we remain cautious.

We Could See Pack's Dividend Growing

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 company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Pack's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Pack is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Pack that investors should know about before committing capital to this stock. 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.