Nihon Kohden (TSE:6849) Is Due To Pay A Dividend Of ¥16.00

The board of Nihon Kohden Corporation (TSE:6849) has announced that it will pay a dividend on the 27th of June, with investors receiving ¥16.00 per share. This means the annual payment is 1.5% of the current stock price, which is above the average for the industry.

See our latest analysis for Nihon Kohden

Nihon Kohden's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Nihon Kohden's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 20.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nihon Kohden Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥31.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Nihon Kohden's EPS has declined at around 2.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Nihon Kohden's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For instance, we've picked out 2 warning signs for Nihon Kohden that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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