NH Foods (TSE:2282) Has Announced That It Will Be Increasing Its Dividend To ¥135.00

NH Foods Ltd. (TSE:2282) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of June to ¥135.00. This takes the dividend yield to 2.8%, which shareholders will be pleased with.

See our latest analysis for NH Foods

NH Foods' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, NH Foods was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 87% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 13.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

NH Foods Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥70.00 in 2015 to the most recent total annual payment of ¥135.00. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

NH Foods Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. NH Foods has impressed us by growing EPS at 8.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 NH Foods analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.