Hakudo's (TSE:7637) Dividend Will Be ¥40.00

Hakudo Co., Ltd. (TSE:7637) has announced that it will pay a dividend of ¥40.00 per share on the 11th of December. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

See our latest analysis for Hakudo

Hakudo's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, Hakudo is earning enough to cover the payment, but then it makes up 98% 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.

If the trend of the last few years continues, EPS will grow by 4.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% 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 ¥29.00 in 2014, and the most recent fiscal year payment was ¥85.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Hakudo has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Hakudo May Find It Hard To Grow The Dividend

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 has been rising at 4.1% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.1% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Hakudo will make a great income stock. While Hakudo is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Hakudo that you should be aware of before investing. Is Hakudo 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.

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