Nihon M&A Center Holdings' (TSE:2127) Dividend Will Be Increased To ¥15.00

Nihon M&A Center Holdings Inc. (TSE:2127) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of June to ¥15.00. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

View our latest analysis for Nihon M&A Center Holdings

Estimates Indicate Nihon M&A Center 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, Nihon M&A Center Holdings' dividend made up quite a large proportion of earnings but only 61% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 9.2%. If the dividend continues on its recent course, the payout ratio in 12 months could be 95%, which is a bit high and could start applying pressure to the balance sheet.

Nihon M&A Center Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥4.00 in 2015, and the most recent fiscal year payment was ¥23.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Nihon M&A Center Holdings May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Nihon M&A Center Holdings hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Nihon M&A Center Holdings 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Nihon M&A Center Holdings that investors should know about before committing capital to this stock. 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.