Harima Chemicals Group (TSE:4410) Will Pay A Dividend Of ¥21.00

The board of Harima Chemicals Group, Inc. (TSE:4410) has announced that it will pay a dividend of ¥21.00 per share on the 4th of December. The dividend yield will be 4.5% based on this payment which is still above the industry average.

View our latest analysis for Harima Chemicals Group

Harima Chemicals Group's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Harima Chemicals Group 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.

Over the next year, EPS might fall by 41.0% based on recent performance. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥42.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

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. Harima Chemicals Group's earnings per share has shrunk at 41% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Harima Chemicals Group's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Harima Chemicals Group 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. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Harima Chemicals Group that you should be aware of before investing. 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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