Nissin Foods HoldingsLtd (TSE:2897) Has Affirmed Its Dividend Of ¥35.00

The board of Nissin Foods Holdings Co.,Ltd. (TSE:2897) has announced that it will pay a dividend on the 1st of December, with investors receiving ¥35.00 per share. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

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Nissin Foods HoldingsLtd's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Nissin Foods HoldingsLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 7.9%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Nissin Foods HoldingsLtd

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 ¥26.67 total annually to ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

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. We are encouraged to see that Nissin Foods HoldingsLtd has grown earnings per share at 9.0% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Nissin Foods HoldingsLtd is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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 instance, we've picked out 1 warning sign for Nissin Foods HoldingsLtd that investors should take into consideration. 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.