Hulic (TSE:3003) Is Increasing Its Dividend To ¥28.00

The board of Hulic Co., Ltd. (TSE:3003) has announced that it will be paying its dividend of ¥28.00 on the 27th of March, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

View our latest analysis for Hulic

Hulic's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Hulic was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 6.3%. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

Hulic Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥7.50, compared to the most recent full-year payment of ¥54.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Hulic has grown earnings per share at 8.1% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Hulic will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Hulic has 2 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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