NJS (TSE:2325) Has Announced A Dividend Of ¥45.00

The board of NJS Co., Ltd. (TSE:2325) has announced that it will pay a dividend of ¥45.00 per share on the 12th of September. This takes the dividend yield to 2.9%, which shareholders will be pleased with.

View our latest analysis for NJS

NJS' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by NJS' earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 82% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share could rise by 1.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥40.00 total annually to ¥90.00. This means that it has been growing its distributions at 8.4% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. NJS might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. NJS hasn't seen much change in its earnings per share over the last five years. Growth of 1.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think NJS' payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments NJS has been making. This company is not in the top tier of income providing stocks.

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. For example, we've identified 3 warning signs for NJS (1 is a bit unpleasant!) 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.