Nitto Boseki's (TSE:3110) Shareholders Will Receive A Bigger Dividend Than Last Year

Nitto Boseki Co., Ltd. (TSE:3110) will increase its dividend from last year's comparable payment on the 22nd of June to ¥86.50. This takes the annual payment to 1.0% of the current stock price, which unfortunately is below what the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nitto Boseki's stock price has increased by 47% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Nitto Boseki's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Nitto Boseki's dividend was only 34% of earnings, however it was paying out 513% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to fall by 1.4%. If the dividend continues along recent trends, we estimate the payout ratio could be 32%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

View our latest analysis for Nitto Boseki

Nitto Boseki 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 ¥25.00 total annually to ¥114.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Nitto Boseki 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, Nitto Boseki has only grown its earnings per share at 4.1% per annum over the past five years. While growth may be thin on the ground, Nitto Boseki could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nitto Boseki's payments are rock solid. While Nitto Boseki is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Nitto Boseki that investors should take into consideration. Is Nitto Boseki not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.