Nissan Chemical (TSE:4021) Will Pay A Dividend Of ¥70.00

Nissan Chemical Corporation's (TSE:4021) investors are due to receive a payment of ¥70.00 per share on 4th of December. The dividend yield will be 3.5% based on this payment which is still above the industry average.

See our latest analysis for Nissan Chemical

Nissan Chemical's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. 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.

The next year is set to see EPS grow by 7.0%. If the dividend continues on this path, the payout ratio could be 65% by next year, which we think can be pretty sustainable going forward.

Nissan Chemical Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥26.00, compared to the most recent full-year payment of ¥164.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Nissan Chemical Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Nissan Chemical has grown earnings per share at 6.9% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Nissan Chemical's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Nissan Chemical is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. As an example, we've identified 1 warning sign for Nissan Chemical that you should be aware of before investing. 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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