Nissan Chemical (TSE:4021) Has Announced A Dividend Of ¥70.00

The board of Nissan Chemical Corporation (TSE:4021) has announced that it will pay a dividend of ¥70.00 per share on the 4th of December. The dividend yield will be 3.3% based on this payment which is still above the industry average.

View our latest analysis for Nissan Chemical

Nissan Chemical's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 167% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 7.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nissan Chemical Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥26.00 total annually to ¥164.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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. Nissan Chemical has seen EPS rising for the last five years, at 6.9% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Nissan Chemical 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Nissan Chemical that investors need to be conscious of moving forward. Is Nissan Chemical not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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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