Soda Nikka (TSE:8158) Has Announced That It Will Be Increasing Its Dividend To ¥23.00

The board of Soda Nikka Co., Ltd. (TSE:8158) has announced that it will be paying its dividend of ¥23.00 on the 26th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Soda Nikka

Soda Nikka's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Soda Nikka's earnings easily covered the dividend, but free cash flows were negative. 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.

Over the next year, EPS could expand by 21.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Soda Nikka Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥13.00 total annually to ¥40.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Soda Nikka has seen EPS rising for the last five years, at 21% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Soda Nikka's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Soda Nikka's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Soda Nikka that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.