Hisamitsu Pharmaceutical (TSE:4530) Has Announced That It Will Be Increasing Its Dividend To ¥45.00

The board of Hisamitsu Pharmaceutical Co., Inc. (TSE:4530) has announced that it will be paying its dividend of ¥45.00 on the 7th of November, an increased payment from last year's comparable dividend. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

See our latest analysis for Hisamitsu Pharmaceutical

Hisamitsu Pharmaceutical's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last dividend, Hisamitsu Pharmaceutical is earning enough to cover the payment, but then it makes up 122% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 11.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Hisamitsu Pharmaceutical Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥70.00 in 2014 to the most recent total annual payment of ¥86.00. This means that it has been growing its distributions at 2.1% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Unfortunately, Hisamitsu Pharmaceutical's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Hisamitsu Pharmaceutical's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Hisamitsu Pharmaceutical that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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