Hisamitsu Pharmaceutical's (TSE:4530) Dividend Will Be ¥45.00

The board of Hisamitsu Pharmaceutical Co., Inc. (TSE:4530) has announced that it will pay a dividend of ¥45.00 per share on the 26th of May. This takes the annual payment to 1.8% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Hisamitsu Pharmaceutical

Hisamitsu Pharmaceutical's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Hisamitsu Pharmaceutical's dividend was only 41% of earnings, however it was paying out 3,564% of free 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.

Over the next year, EPS is forecast to expand by 13.7%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Hisamitsu Pharmaceutical Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥70.00, compared to the most recent full-year payment of ¥86.00. This means that it has been growing its distributions at 2.1% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Hisamitsu Pharmaceutical has seen earnings per share falling at 3.8% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

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 don't think Hisamitsu Pharmaceutical is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Hisamitsu Pharmaceutical that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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