Trusco Nakayama (TSE:9830) Is Due To Pay A Dividend Of ¥24.00

The board of Trusco Nakayama Corporation (TSE:9830) has announced that it will pay a dividend of ¥24.00 per share on the 5th of March. Based on this payment, the dividend yield for the company will be 2.2%, which is fairly typical for the industry.

Check out our latest analysis for Trusco Nakayama

Trusco Nakayama's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Trusco Nakayama's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 7.9%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Trusco Nakayama's Dividend Has Lacked Consistency

Trusco Nakayama has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ¥31.25 in 2015 to the most recent total annual payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Trusco Nakayama might have put its house in order since then, but we remain cautious.

Trusco Nakayama Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Trusco Nakayama has seen EPS rising for the last five years, at 9.5% per annum. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Trusco Nakayama 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Trusco Nakayama 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.