Nihon House Holdings (TSE:1873) Has Affirmed Its Dividend Of ¥5.00

Nihon House Holdings Co., Ltd. (TSE:1873) will pay a dividend of ¥5.00 on the 13th of January. The dividend yield will be 3.5% based on this payment which is still above the industry average.

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Estimates Indicate Nihon House Holdings' Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 125% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 16%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to fall by 22.7% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 154%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Nihon House Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥18.00 total annually to ¥11.00. This works out to be a decline of approximately 4.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

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. Over the past five years, it looks as though Nihon House Holdings' EPS has declined at around 23% a year. 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.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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 don't think Nihon House Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 5 warning signs for Nihon House Holdings (1 is concerning!) that you should be aware of before investing. 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.