Nihon Tokushu Toryo's (TSE:4619) Dividend Will Be ¥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 takes the dividend yield to 5.4%, which shareholders will be pleased with.

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 44% 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 24% 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.

If the trend of the last few years continues, EPS will grow by 16.6% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

See our latest analysis for Nihon Tokushu Toryo

Nihon Tokushu Toryo Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥110.00. This means that it has been growing its distributions at 27% per annum over that time. 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

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Nihon Tokushu Toryo has grown earnings per share at 17% per year over the past five years. Nihon Tokushu Toryo definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Nihon Tokushu Toryo's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Nihon Tokushu Toryo's payments are rock solid. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Nihon Tokushu Toryo that investors should know about before committing capital to this stock. 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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