Natori (TSE:2922) Will Pay A Larger Dividend Than Last Year At ¥13.00

The board of Natori Co., Ltd. (TSE:2922) has announced that it will be increasing its dividend by 8.3% on the 5th of December to ¥13.00, up from last year's comparable payment of ¥12.00. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Natori's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Natori's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 4.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 35%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Natori

Natori Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥16.00 in 2015, and the most recent fiscal year payment was ¥24.00. This means that it has been growing its distributions at 4.1% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Natori's EPS has declined at around 4.7% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Natori's Dividend

Overall, we always like to see the dividend being raised, but we don't think Natori will make a great income stock. While Natori is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Natori has 2 warning signs (and 1 which is a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.