HIROSHIMA GASLtd (TSE:9535) Will Pay A Dividend Of ¥6.00

The board of HIROSHIMA GAS Co.,Ltd. (TSE:9535) has announced that it will pay a dividend of ¥6.00 per share on the 2nd of December. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.

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HIROSHIMA GASLtd's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, HIROSHIMA GASLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Unless the company can turn things around, EPS could fall by 5.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for HIROSHIMA GASLtd

HIROSHIMA GASLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥6.00 in 2015 to the most recent total annual payment of ¥12.00. This means that it has been growing its distributions at 7.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. HIROSHIMA GASLtd has seen earnings per share falling at 5.0% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On HIROSHIMA GASLtd's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about HIROSHIMA GASLtd's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think HIROSHIMA GASLtd is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for HIROSHIMA GASLtd (of which 1 can't be ignored!) you should know about. 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.