Nichias (TSE:5393) Is Increasing Its Dividend To ¥52.00

The board of Nichias Corporation (TSE:5393) has announced that it will be paying its dividend of ¥52.00 on the 2nd of December, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.2%.

Check out our latest analysis for Nichias

Nichias' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Nichias was paying only paying out a fraction of earnings, but the payment was a massive 108% of 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.

Looking forward, earnings per share is forecast to rise by 4.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nichias Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥32.00 in 2014, and the most recent fiscal year payment was ¥104.00. This means that it has been growing its distributions at 13% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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. Nichias has impressed us by growing EPS at 11% per year over the past five years. Nichias definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Nichias' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Nichias 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Nichias that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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