Hakuto's (TSE:7433) Dividend Will Be Reduced To ¥100.00

Hakuto Co., Ltd. (TSE:7433) is reducing its dividend from last year's comparable payment to ¥100.00 on the 8th of December. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.

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Hakuto's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Hakuto's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to grow by 31.3% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Hakuto

Dividend Volatility

Although the company has a long dividend history, it has been cut 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 implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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. Hakuto has impressed us by growing EPS at 31% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Hakuto that you should be aware of before investing. Is Hakuto not quite the opportunity you were looking for? Why not check out our selection of top 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.