Is It Worth Considering HYPER Inc. (TSE:3054) For Its Upcoming Dividend?
Readers hoping to buy HYPER Inc. (TSE:3054) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase HYPER's shares on or after the 29th of December will not receive the dividend, which will be paid on the 30th of March.
The company's next dividend payment will be JP¥3.50 per share. Last year, in total, the company distributed JP¥7.00 to shareholders. Calculating the last year's worth of payments shows that HYPER has a trailing yield of 2.4% on the current share price of JP¥286.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether HYPER can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. HYPER is paying out just 8.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether HYPER generated enough free cash flow to afford its dividend. It paid out 96% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
While HYPER's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to HYPER's ability to maintain its dividend.
Check out our latest analysis for HYPER
Click here to see how much of its profit HYPER paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see HYPER earnings per share are up 2.0% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. HYPER has seen its dividend decline 1.3% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
Has HYPER got what it takes to maintain its dividend payments? HYPER has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy HYPER today.
If you want to look further into HYPER, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 2 warning signs for HYPER you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.