Soda Nikka Co., Ltd. (TSE:8158) has announced that it will pay a dividend of ¥16.00 per share on the 12th of December. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.
View our latest analysis for Soda Nikka
Soda Nikka's Earnings Easily Cover The Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, based ont he last payment, Soda Nikka was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.
Over the next year, EPS could expand by 18.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.
Soda Nikka Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥13.00, compared to the most recent full-year payment of ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Soda Nikka has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Soda Nikka that you should be aware of before investing. Is Soda Nikka 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.
About TSE:8158
Soda Nikka
Engages in the trading of chemicals in Japan and internationally.
Flawless balance sheet established dividend payer.
