Nippn (TSE:2001) Will Pay A Dividend Of ¥28.00

Nippn Corporation (TSE:2001) has announced that it will pay a dividend of ¥28.00 per share on the 1st of July. This will take the dividend yield to an attractive 2.0%, providing a nice boost to shareholder returns.

View our latest analysis for Nippn

Nippn's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Nippn's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 3.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 29%, 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

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. The annual payment during the last 10 years was ¥24.00 in 2014, and the most recent fiscal year payment was ¥49.00. This implies that the company grew its distributions at a yearly rate of about 7.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

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. Nippn has seen EPS rising for the last five years, at 15% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Nippn Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Nippn is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Nippn (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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