Nippon SeisenLtd (TSE:5659) Is Due To Pay A Dividend Of ¥23.00

Nippon Seisen Co.,Ltd. (TSE:5659) will pay a dividend of ¥23.00 on the 4th of December. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

See our latest analysis for Nippon SeisenLtd

Nippon SeisenLtd Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Nippon SeisenLtd's earnings. This means that a large portion of its earnings are being retained to grow the business.

If the company can't turn things around, EPS could fall by 0.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 176%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥46.00. This means that it has been growing its distributions at 16% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Nippon SeisenLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Nippon SeisenLtd that investors should take into consideration. Is Nippon SeisenLtd 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.

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