Nissin Foods' (HKG:1475) Shareholders Will Receive A Bigger Dividend Than Last Year

Nissin Foods Company Limited's (HKG:1475) dividend will be increasing to HK$0.17 on 29th of June. Based on the announced payment, the dividend yield for the company will be 3.5%, which is fairly typical for the industry.

See our latest analysis for Nissin Foods

Nissin Foods' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite comfortably covered by Nissin Foods' earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 14.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nissin Foods Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from HK$0.073 in 2018 to the most recent annual payment of HK$0.15. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Nissin Foods has seen EPS rising for the last five years, at 21% per annum. Nissin Foods is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Nissin Foods' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Nissin Foods' payments are rock solid. While Nissin Foods is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've picked out 1 warning sign for Nissin Foods that investors should know about before committing capital to this stock. 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.