Nippon Tungsten (TSE:6998) Has Announced A Dividend Of ¥25.00

The board of Nippon Tungsten Co., Ltd. (TSE:6998) has announced that it will pay a dividend on the 6th of December, with investors receiving ¥25.00 per share. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Nippon Tungsten

Nippon Tungsten's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Nippon Tungsten's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Unless the company can turn things around, EPS could fall by 8.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥20.00 total annually to ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year 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. Nippon Tungsten might have put its house in order since then, but we remain cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Nippon Tungsten's earnings per share has fallen at approximately 8.7% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Nippon Tungsten's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nippon Tungsten's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Nippon Tungsten that you should be aware of before investing. 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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