Nipro (TSE:8086) Has Announced A Dividend Of ¥12.00

Nipro Corporation (TSE:8086) has announced that it will pay a dividend of ¥12.00 per share on the 4th of December. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.

See our latest analysis for Nipro

Nipro's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Nipro is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 10.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥25.50 in 2014 to the most recent total annual payment of ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Nipro's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Nipro's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Nipro's payments are rock solid. While Nipro is earning enough to cover the payments, the cash flows are lacking. We don't think Nipro is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Nipro you should be aware of, and 1 of them doesn't sit too well with us. 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.

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