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 makes the dividend yield 5.1%, which is above the industry average.

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Nihon Tokushu Toryo's Projected Earnings Seem Likely To Cover Future Distributions

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 39% 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 33.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Nihon Tokushu Toryo

Nihon Tokushu Toryo Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥110.00. This means that it has been growing its distributions at 27% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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. Nihon Tokushu Toryo has impressed us by growing EPS at 34% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 1 warning sign for Nihon Tokushu Toryo that you should be aware of before investing. 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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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.