Nippon RietecLtd (TSE:1938) Is Increasing Its Dividend To ¥60.00

Nippon Rietec Co.,Ltd. (TSE:1938) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to ¥60.00. Based on this payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

Check out our latest analysis for Nippon RietecLtd

Nippon RietecLtd's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Nippon RietecLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 5.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Nippon RietecLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from ¥9.00 total annually to ¥36.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Nippon RietecLtd's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Nippon RietecLtd has grown earnings per share at 5.9% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nippon RietecLtd's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nippon RietecLtd's payments are rock solid. While Nippon RietecLtd is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Nippon RietecLtd has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is Nippon RietecLtd 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.