Nishi-Nippon Financial Holdings (TSE:7189) Is Paying Out A Larger Dividend Than Last Year

Nishi-Nippon Financial Holdings, Inc. (TSE:7189) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to ¥45.00. This makes the dividend yield 4.4%, which is above the industry average.

View our latest analysis for Nishi-Nippon Financial Holdings

Nishi-Nippon Financial Holdings' Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Nishi-Nippon Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Nishi-Nippon Financial Holdings' last earnings report, the payout ratio is at a decent 31%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to expand by 15.9%. If the dividend continues along recent trends, we estimate the future payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥25.00 total annually to ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Nishi-Nippon Financial Holdings has grown earnings per share at 10.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Nishi-Nippon Financial Holdings' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Nishi-Nippon Financial Holdings that investors need to be conscious of moving forward. Is Nishi-Nippon Financial Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.