NOMURA's (TSE:9716) Upcoming Dividend Will Be Larger Than Last Year's

NOMURA Co., Ltd. (TSE:9716) will increase its dividend on the 26th of May to ¥32.00, which is 19% higher than last year's payment from the same period of ¥27.00. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for NOMURA

Estimates Indicate NOMURA's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, NOMURA's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next 12 months is set to see EPS grow by 27.9%. If the dividend continues on its recent course, the payout ratio in 12 months could be 100%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥8.00 total annually to ¥27.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. NOMURA has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

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. NOMURA's EPS has fallen by approximately 19% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think NOMURA will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for NOMURA that investors need to be conscious of moving forward. 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.