Trusco Nakayama (TSE:9830) Will Pay A Dividend Of ¥24.00

Trusco Nakayama Corporation (TSE:9830) has announced that it will pay a dividend of ¥24.00 per share on the 5th of March. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.

Check out our latest analysis for Trusco Nakayama

Trusco Nakayama's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Looking forward, earnings per share is forecast to rise by 11.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Trusco Nakayama's Dividend Has Lacked Consistency

Looking back, Trusco Nakayama's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was ¥31.25, compared to the most recent full-year payment of ¥50.00. This means that it has been growing its distributions at 6.1% per annum 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.

We Could See Trusco Nakayama's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Trusco Nakayama has seen EPS rising for the last five years, at 6.1% 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.

Our Thoughts On Trusco Nakayama's Dividend

Overall, we always like to see the dividend being raised, but we don't think Trusco Nakayama will make a great income stock. 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.

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 instance, we've picked out 1 warning sign for Trusco Nakayama that investors should take into consideration. 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.