NHK Spring (TSE:5991) Is Paying Out A Larger Dividend Than Last Year

NHK Spring Co., Ltd. (TSE:5991) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of December to ¥27.00. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

See our latest analysis for NHK Spring

NHK Spring's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, NHK Spring was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 2.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥57.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. NHK Spring has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that NHK Spring has grown earnings per share at 44% per year over the past five years. NHK Spring is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

NHK Spring Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that NHK Spring is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 instance, we've picked out 2 warning signs for NHK Spring that investors should take into consideration. 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.

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