Nihon Tokushu Toryo (TSE:4619) Has Announced A Dividend Of ¥50.00

Nihon Tokushu Toryo Co., Ltd.'s (TSE:4619) investors are due to receive a payment of ¥50.00 per share on 1st of December. This will take the annual payment to 5.3% of the stock price, which is above what most companies in the industry pay.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nihon Tokushu Toryo's stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Nihon Tokushu Toryo's 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. Before making this announcement, Nihon Tokushu Toryo was paying a whopping 139% as a dividend, but this only made up 40% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 16.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Nihon Tokushu Toryo

Nihon Tokushu Toryo 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 ¥10.00 in 2015 to the most recent total annual payment of ¥110.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Nihon Tokushu Toryo has grown earnings per share at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Nihon Tokushu Toryo's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Nihon Tokushu Toryo is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Nihon Tokushu Toryo that investors should take into consideration. 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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