Soda Nikka Co., Ltd. (TSE:8158) will pay a dividend of ¥16.00 on the 12th of December. The payment will take the dividend yield to 2.7%, which is in line with the average for the industry.
Check out our latest analysis for Soda Nikka
Soda Nikka's Payment Could Potentially Have Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Soda Nikka was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
Looking forward, earnings per share could rise by 18.7% over the next year if the trend from the last few years continues. 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 an extended history of paying stable dividends. The annual payment during the last 10 years was ¥13.00 in 2014, and the most recent fiscal year payment was ¥32.00. This implies that the company grew its distributions at a yearly rate of about 9.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Soda Nikka has impressed us by growing EPS at 19% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Our Thoughts On Soda Nikka's Dividend
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 payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Soda Nikka that investors should take into consideration. 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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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.
