NittoseikoLtd (TSE:5957) Will Pay A Dividend Of ¥9.50

The board of Nittoseiko Co.,Ltd. (TSE:5957) has announced that it will pay a dividend on the 28th of March, with investors receiving ¥9.50 per share. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

View our latest analysis for NittoseikoLtd

NittoseikoLtd's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, NittoseikoLtd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 17.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥8.00, compared to the most recent full-year payment of ¥19.00. This means that it has been growing its distributions at 9.0% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 2.5% per year. If NittoseikoLtd is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for NittoseikoLtd that you should be aware of before investing. Is NittoseikoLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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