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

The board of Nippon Air conditioning Services Co., Ltd. (TSE:4658) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥20.00 per share. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

See our latest analysis for Nippon Air conditioning Services

Nippon Air conditioning Services' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Nippon Air conditioning Services is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 4.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nippon Air conditioning Services 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. The annual payment during the last 10 years was ¥8.00 in 2014, and the most recent fiscal year payment was ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year 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.

Nippon Air conditioning Services Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Nippon Air conditioning Services has seen EPS rising for the last five years, at 9.0% per annum. Nippon Air conditioning Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Nippon Air conditioning Services' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Nippon Air conditioning Services is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Nippon Air conditioning Services (1 shouldn't be ignored!) that you should be aware of before investing. 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.