Hamamatsu Photonics K.K (TSE:6965) Is Due To Pay A Dividend Of ¥38.00

The board of Hamamatsu Photonics K.K. (TSE:6965) has announced that it will pay a dividend on the 25th of December, with investors receiving ¥38.00 per share. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Hamamatsu Photonics K.K

Hamamatsu Photonics K.K's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. But before making this announcement, Hamamatsu Photonics K.K's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 94% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Over the next year, EPS is forecast to expand by 5.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

Hamamatsu Photonics K.K Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥25.00 in 2014, and the most recent fiscal year payment was ¥76.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Hamamatsu Photonics K.K has impressed us by growing EPS at 8.2% per year over the past five years. Hamamatsu Photonics K.K definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Hamamatsu Photonics K.K's Dividend

Overall, a consistent dividend is a good thing, and we think that Hamamatsu Photonics K.K has the ability to continue this into the future. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 1 warning sign for Hamamatsu Photonics K.K that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.