Nifco (TSE:7988) Has Announced A Dividend Of ¥40.00

Nifco Inc. (TSE:7988) has announced that it will pay a dividend of ¥40.00 per share on the 25th of November. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

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Nifco's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Nifco's earnings easily 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 fall by 1.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 18%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Nifco

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 ¥35.00 in 2015 to the most recent total annual payment of ¥80.00. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Nifco might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Nifco has impressed us by growing EPS at 21% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Nifco Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Nifco is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Nifco (1 is concerning!) that you should be aware of before investing. Is Nifco not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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