Nomura Holdings' (TSE:8604) Upcoming Dividend Will Be Larger Than Last Year's

The board of Nomura Holdings, Inc. (TSE:8604) has announced that the dividend on 2nd of June will be increased to ¥33.00, which will be 120% higher than last year's payment of ¥15.00 which covered the same period. This makes the dividend yield 3.9%, which is above the industry average.

Check out our latest analysis for Nomura Holdings

Nomura Holdings' 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. Based on the last payment, Nomura Holdings was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to fall by 1.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 54%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 ¥38.00. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Nomura Holdings' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Nomura Holdings has grown earnings per share at 7.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nomura Holdings' prospects of growing its dividend payments in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

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 2 warning signs for Nomura Holdings (1 is a bit unpleasant!) that you should be aware of before investing. Is Nomura Holdings 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.