Nissei Plastic IndustrialLtd (TSE:6293) Is Paying Out A Dividend Of ¥15.00

Nissei Plastic Industrial Co.,Ltd.'s (TSE:6293) investors are due to receive a payment of ¥15.00 per share on 4th of December. Based on this payment, the dividend yield on the company's stock will be 3.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Nissei Plastic IndustrialLtd

Nissei Plastic IndustrialLtd Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the dividend made up 179% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 31.3% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 280%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥8.00 total annually to ¥35.00. This means that it has been growing its distributions at 16% per annum over that time. Nissei Plastic IndustrialLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 31% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Nissei Plastic IndustrialLtd's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Nissei Plastic IndustrialLtd make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Nissei Plastic IndustrialLtd has 5 warning signs (and 4 which can't be ignored) we think you should know about. 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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