Nittetsu Mining's (TSE:1515) Dividend Will Be Reduced To ¥80.00

Nittetsu Mining Co., Ltd. (TSE:1515) has announced that on 27th of November, it will be paying a dividend of¥80.00, which a reduction from last year's comparable dividend. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Nittetsu Mining

Nittetsu Mining's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Nittetsu Mining's dividend was only 36% of earnings, however it was paying out 106% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 4.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥35.00 in 2014 to the most recent total annual payment of ¥161.00. This means that it has been growing its distributions at 16% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Nittetsu Mining May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 4.3% per year. While growth may be thin on the ground, Nittetsu Mining could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Nittetsu Mining's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Nittetsu Mining 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Nittetsu Mining that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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