Trusco Nakayama (TSE:9830) Is Due To Pay A Dividend Of ¥28.50

The board of Trusco Nakayama Corporation (TSE:9830) has announced that it will pay a dividend of ¥28.50 per share on the 6th of March. This takes the annual payment to 2.4% of the current stock price, which is about average for the industry.

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Trusco Nakayama was earning enough to cover the dividend, but free cash flows weren't positive. 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 is forecast to expand by 3.5%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Trusco Nakayama

Trusco Nakayama's Dividend Has Lacked Consistency

Trusco Nakayama has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from ¥31.25 total annually to ¥59.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Trusco Nakayama has seen EPS rising for the last five years, at 14% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Trusco Nakayama's prospects of growing its dividend payments in the future.

Our Thoughts On Trusco Nakayama's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Trusco Nakayama's payments are rock solid. While Trusco Nakayama is earning enough to cover the payments, the cash flows are lacking. We don't think Trusco Nakayama is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Trusco Nakayama that you should be aware of before investing. 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.