Hard Off CorporationLtd (TSE:2674) Is Paying Out A Dividend Of ¥76.00

Hard Off Corporation Co.,Ltd. (TSE:2674) will pay a dividend of ¥76.00 on the 24th of June. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Hard Off CorporationLtd

Hard Off CorporationLtd's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 127% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 33.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥25.00 in 2014, and the most recent fiscal year payment was ¥76.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Hard Off CorporationLtd has impressed us by growing EPS at 34% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Hard Off CorporationLtd could prove to be a strong dividend payer.

Our Thoughts On Hard Off CorporationLtd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Hard Off CorporationLtd that investors need to be conscious of moving forward. 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.