Nihon Trim's (TSE:6788) Shareholders Will Receive A Bigger Dividend Than Last Year

Nihon Trim Co., Ltd.'s (TSE:6788) dividend will be increasing from last year's payment of the same period to ¥95.00 on 26th of June. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

View our latest analysis for Nihon Trim

Nihon Trim's 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. However, prior to this announcement, Nihon Trim's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 14.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

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. Since 2015, the annual payment back then was ¥50.00, compared to the most recent full-year payment of ¥95.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Nihon Trim has been growing its earnings per share at 10% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Nihon Trim Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Nihon Trim that investors need to be conscious of moving forward. Is Nihon Trim 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.