Pack's (TSE:3950) Dividend Will Be ¥52.00

The Pack Corporation's (TSE:3950) investors are due to receive a payment of ¥52.00 per share on 4th of September. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

Check out our latest analysis for Pack

Pack's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Pack's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 3.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

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 ¥50.00 in 2014, and the most recent fiscal year payment was ¥86.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.6% 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. Pack might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

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. Earnings per share has been crawling upwards at 3.2% per year. While EPS growth is quite low, Pack has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Pack's Dividend

Overall, we always like to see the dividend being raised, but we don't think Pack will make a great income stock. While Pack is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Pack (of which 2 can't be ignored!) you should know about. 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.