Nifco (TSE:7988) Is Increasing Its Dividend To ¥35.00

Nifco Inc. (TSE:7988) will increase its dividend from last year's comparable payment on the 27th of November to ¥35.00. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Nifco

Nifco's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Nifco was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 18.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 ¥23.50 in 2014 to the most recent total annual payment of ¥70.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Nifco May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Nifco hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Nifco's Dividend

Overall, we always like to see the dividend being raised, but we don't think Nifco will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

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 Nifco 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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