Nihon Kohden (TSE:6849) Has Affirmed Its Dividend Of ¥15.00

Nihon Kohden Corporation's (TSE:6849) investors are due to receive a payment of ¥15.00 per share on 29th of November. The dividend yield will be 1.7% based on this payment which is still above the industry average.

View our latest analysis for Nihon Kohden

Nihon Kohden's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Nihon Kohden 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 94% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Over the next year, EPS is forecast to expand by 14.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nihon Kohden Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥20.00 total annually to ¥31.00. This implies that the company grew its distributions at a yearly rate of about 4.5% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Nihon Kohden has been growing its earnings per share at 7.0% a year over the past five years. Nihon Kohden definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Nihon Kohden's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nihon Kohden's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Nihon Kohden has been making. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Nihon Kohden 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.

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.