NIPPON KANZAI HoldingsLtd's (TSE:9347) Dividend Will Be ¥27.00

The board of NIPPON KANZAI Holdings Co.,Ltd. (TSE:9347) has announced that it will pay a dividend of ¥27.00 per share on the 4th of December. This payment means that the dividend yield will be 2.0%, which is around the industry average.

Check out our latest analysis for NIPPON KANZAI HoldingsLtd

NIPPON KANZAI HoldingsLtd's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, NIPPON KANZAI HoldingsLtd's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 4.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥54.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 4.0% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On NIPPON KANZAI HoldingsLtd's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 1 warning sign for NIPPON KANZAI HoldingsLtd that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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