Should Income Investors Look At HYPER Inc. (TSE:3054) Before Its Ex-Dividend?

Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that HYPER Inc. (TSE:3054) is about to go ex-dividend in just 3 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. Therefore, if you purchase HYPER’s shares on or after the 29th of June, you won’t be eligible to receive the dividend, when it is paid on the 1st of September.

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. Last year’s total dividend payments show that HYPER has a trailing yield of 3.0% on the current share price of JP¥230.00. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.

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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. Fortunately HYPER’s payout ratio is modest, at just 38% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 8.5% of its free cash flow in the last year.

It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It’s not encouraging to see that HYPER’s earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. HYPER’s dividend payments per share have declined at 2.5% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

Is HYPER worth buying for its dividend? While it’s not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. While it does have some good things going for it, we’re a bit ambivalent and it would take more to convince us of HYPER’s dividend merits.

So while HYPER looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example, we’ve found 2 warning signs for HYPER that we recommend you consider before investing in the business.

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.