Nichireki Group's (TSE:5011) Dividend Will Be Increased To ¥40.00

The board of Nichireki Group Co., Ltd. (TSE:5011) has announced that it will be paying its dividend of ¥40.00 on the 30th of June, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

View our latest analysis for Nichireki Group

Nichireki Group's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Nichireki Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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.

Looking forward, earnings per share is forecast to rise by 8.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

Nichireki Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥80.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Nichireki Group has grown earnings per share at 22% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Nichireki Group could prove to be a strong dividend payer.

Our Thoughts On Nichireki Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Nichireki Group's payments are rock solid. While Nichireki Group is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Nichireki Group 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.