NOK (TSE:7240) Has Announced A Dividend Of ¥50.00

NOK Corporation (TSE:7240) will pay a dividend of ¥50.00 on the 27th of June. Based on this payment, the dividend yield on the company's stock will be 4.4%, which is an attractive boost to shareholder returns.

View our latest analysis for NOK

NOK'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, NOK was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 5.9%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥100.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. NOK 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. NOK has impressed us by growing EPS at 50% 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.

We Really Like NOK's Dividend

Overall, we like to see the dividend staying consistent, and we think NOK might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for NOK that investors need to be conscious of moving forward. 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.