Nippon Tungsten (TSE:6998) Is Paying Out A Dividend Of ¥25.00

The board of Nippon Tungsten Co., Ltd. (TSE:6998) has announced that it will pay a dividend of ¥25.00 per share on the 9th of June. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

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Nippon Tungsten's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Nippon Tungsten was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 1.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Nippon Tungsten

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥25.00, compared to the most recent full-year payment of ¥50.00. This means that it has been growing its distributions at 7.2% 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.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Nippon Tungsten's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Nippon Tungsten is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Nippon Tungsten's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Nippon Tungsten that you should be aware of before investing. Is Nippon Tungsten not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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