Nippon Thompson (TSE:6480) Has Announced A Dividend Of ¥9.50

The board of Nippon Thompson Co., Ltd. (TSE:6480) has announced that it will pay a dividend on the 28th of June, with investors receiving ¥9.50 per share. However, the dividend yield of 3.0% is still a decent boost to shareholder returns.

See our latest analysis for Nippon Thompson

Nippon Thompson's Dividend Is 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, Nippon Thompson 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 25.2%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty 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 dividend has gone from an annual total of ¥10.00 in 2014 to the most recent total annual payment of ¥19.00. This implies that the company grew its distributions at a yearly rate of about 6.6% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Nippon Thompson Could Grow Its Dividend

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. We are encouraged to see that Nippon Thompson has grown earnings per share at 6.3% per year over the past five years. Nippon Thompson definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Even though the dividend was cut this year, we think Nippon Thompson has the ability to make consistent payments in the future. 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.

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 example, we've picked out 1 warning sign for Nippon Thompson 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.