Nippon Sharyo (TSE:7102) Is Due To Pay A Dividend Of ¥20.00

Nippon Sharyo, Ltd.'s (TSE:7102) investors are due to receive a payment of ¥20.00 per share on 2nd of December. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nippon Sharyo's stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Nippon Sharyo's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Nippon Sharyo is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, EPS could fall by 1.7% 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 be 8.1%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Nippon Sharyo

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥50.00 in 2015 to the most recent total annual payment of ¥40.00. This works out to be a decline of approximately 2.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Nippon Sharyo May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nippon Sharyo hasn't seen much change in its earnings per share over the last five years.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Nippon Sharyo's payments are rock solid. While Nippon Sharyo is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Nippon Sharyo that investors need to be conscious of moving forward. Is Nippon Sharyo 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.