Nippon RietecLtd (TSE:1938) Is Paying Out A Larger Dividend Than Last Year

Nippon Rietec Co.,Ltd.'s (TSE:1938) dividend will be increasing from last year's payment of the same period to ¥32.00 on 28th of June. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

See our latest analysis for Nippon RietecLtd

Nippon RietecLtd's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Nippon RietecLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 4.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 30%, which is definitely feasible to continue.

Nippon RietecLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥9.00, compared to the most recent full-year payment of ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Nippon RietecLtd May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. In the last five years, Nippon RietecLtd's earnings per share has shrunk at approximately 4.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Nippon RietecLtd's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for Nippon RietecLtd that investors need to be conscious of moving forward. 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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