Nippon Air conditioning Services' (TSE:4658) Dividend Will Be ¥20.00

Nippon Air conditioning Services Co., Ltd. (TSE:4658) has announced that it will pay a dividend of ¥20.00 per share on the 2nd of December. This makes the dividend yield 3.8%, which is above the industry average.

View our latest analysis for Nippon Air conditioning Services

Nippon Air conditioning Services' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Nippon Air conditioning Services was paying a whopping 183% as a dividend, but this only made up 38% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 9.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

Nippon Air conditioning Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥8.00, compared to the most recent full-year payment of ¥40.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Nippon Air conditioning Services Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nippon Air conditioning Services has impressed us by growing EPS at 9.2% per year over the past five years. 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 Nippon Air conditioning Services' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Nippon Air conditioning Services is earning enough to cover the payments, the cash flows are lacking. We don't think Nippon Air conditioning Services is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Nippon Air conditioning Services that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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