Nakabayashi (TSE:7987) Is Paying Out A Dividend Of ¥12.00

Nakabayashi Co., Ltd.'s (TSE:7987) investors are due to receive a payment of ¥12.00 per share on 26th of June. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

See our latest analysis for Nakabayashi

Nakabayashi Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even in the absence of profits, Nakabayashi is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Over the next year, EPS might fall by 38.3% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥12.00 in 2014 to the most recent total annual payment of ¥24.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 38% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We're Not Big Fans Of Nakabayashi's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Nakabayashi (2 are potentially serious!) that you should be aware of before investing. Is Nakabayashi not quite the opportunity you were looking for? Why not check out our selection of top 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.