Hakuto (TSE:7433) Will Pay A Dividend Of ¥100.00

Hakuto Co., Ltd. (TSE:7433) has announced that it will pay a dividend of ¥100.00 per share on the 4th of June. However, the dividend yield of 5.2% is still a decent boost to shareholder returns.

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Hakuto's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Hakuto's dividend made up quite a large proportion of earnings but only 28% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to grow by 29.9% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Hakuto

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥35.00, compared to the most recent full-year payment of ¥200.00. This means that it has been growing its distributions at 19% per annum 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.

Dividend Growth Could Be Constrained

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Hakuto has grown earnings per share at 30% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Hakuto hasn't been doing.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Hakuto 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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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.