Hakuhodo DY Holdings (TSE:2433) Is Due To Pay A Dividend Of ¥16.00

The board of Hakuhodo DY Holdings Inc (TSE:2433) has announced that it will pay a dividend on the 30th of June, with investors receiving ¥16.00 per share. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

See our latest analysis for Hakuhodo DY Holdings

Hakuhodo DY Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Hakuhodo DY Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 6.1%. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Hakuhodo DY Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Hakuhodo DY Holdings has seen earnings per share falling at 5.6% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Hakuhodo DY Holdings' Dividend

Overall, we think Hakuhodo DY Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For example, we've picked out 1 warning sign for Hakuhodo DY Holdings that investors should know about before committing capital to this stock. Is Hakuhodo DY Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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