NittoseikoLtd's (TSE:5957) Dividend Will Be ¥9.50

Nittoseiko Co.,Ltd. (TSE:5957) has announced that it will pay a dividend of ¥9.50 per share on the 28th of March. This will take the dividend yield to an attractive 3.0%, providing a nice boost to shareholder returns.

See our latest analysis for NittoseikoLtd

NittoseikoLtd's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, NittoseikoLtd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 17.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 ¥8.00 in 2014, and the most recent fiscal year payment was ¥19.00. This means that it has been growing its distributions at 9.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. NittoseikoLtd might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, NittoseikoLtd has only grown its earnings per share at 2.8% per annum over the past five years. 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

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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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.