nms Holdings' (TSE:2162) Upcoming Dividend Will Be Larger Than Last Year's

The board of nms Holdings Corporation (TSE:2162) has announced that it will be paying its dividend of ¥20.00 on the 30th of June, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

nms Holdings' Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though nms Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS could expand by 33.8% if recent trends continue. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

See our latest analysis for nms Holdings

nms Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥2.50, compared to the most recent full-year payment of ¥20.00. This means that it has been growing its distributions at 23% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that nms Holdings has been growing its earnings per share at 34% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

We should note that nms Holdings has issued stock equal to 24% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think nms Holdings' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, nms Holdings has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.