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

Trusco Nakayama Corporation (TSE:9830) will pay a dividend of ¥24.00 on the 5th of March. The payment will take the dividend yield to 2.3%, which is in line with the average for the industry.

See our latest analysis for Trusco Nakayama

Trusco Nakayama's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Trusco Nakayama was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow 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

Looking back, Trusco Nakayama's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was ¥31.25, compared to the most recent full-year payment of ¥50.00. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Trusco Nakayama has impressed us by growing EPS at 9.5% 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 Trusco Nakayama's Dividend

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. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for Trusco Nakayama that investors should know about before committing capital to this stock. Is Trusco Nakayama 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.