Hagiwara Electric Holdings' (TSE:7467) Dividend Will Be Increased To ¥95.00

Hagiwara Electric Holdings Co., Ltd.'s (TSE:7467) dividend will be increasing from last year's payment of the same period to ¥95.00 on 6th of June. This takes the dividend yield to 5.9%, which shareholders will be pleased with.

See our latest analysis for Hagiwara Electric Holdings

Hagiwara Electric Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Hagiwara Electric Holdings' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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.

Looking forward, earnings per share could rise by 2.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥50.00 in 2014 to the most recent total annual payment of ¥185.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Hagiwara Electric Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 2.0% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Hagiwara Electric Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Hagiwara Electric Holdings' payments are rock solid. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Hagiwara Electric Holdings you should be aware of, and 1 of them is a bit unpleasant. 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.