Hulic's (TSE:3003) Dividend Will Be ¥26.00

Hulic Co., Ltd.'s (TSE:3003) investors are due to receive a payment of ¥26.00 per share on 27th of March. The dividend yield of 3.6% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Hulic

Hulic's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Hulic's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 4.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

Hulic Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥7.00 in 2014, and the most recent fiscal year payment was ¥52.00. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Hulic Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Hulic has been growing its earnings per share at 9.5% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Hulic's prospects of growing its dividend payments in the future.

Our Thoughts On Hulic's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Hulic is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Hulic has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.