nms Holdings' (TSE:2162) Dividend Will Be Increased To ¥20.00

nms Holdings Corporation (TSE:2162) will increase its dividend from last year's comparable payment on the 30th of June to ¥20.00. This will take the dividend yield to an attractive 4.5%, providing a nice boost to shareholder returns.

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nms Holdings' Distributions May Be Difficult To Sustain

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

If the trend of the last few years continues, EPS will grow by 37.5% over the next 12 months. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

View our latest analysis for nms Holdings

nms Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from ¥2.50 total annually to ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that nms Holdings has been growing its earnings per share at 38% a year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

An additional note is that the company has been raising capital by issuing stock equal to 24% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

nms Holdings' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think nms Holdings' payments are rock solid. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

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 identified 4 warning signs for nms Holdings (2 make us uncomfortable!) 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.