Nissan Chemical's (TSE:4021) Dividend Will Be ¥70.00

Nissan Chemical Corporation (TSE:4021) will pay a dividend of ¥70.00 on the 4th of December. This makes the dividend yield 3.6%, which will augment investor returns quite nicely.

View our latest analysis for Nissan Chemical

Nissan Chemical's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Nissan Chemical's dividend was only 60% of earnings, however it was paying out 167% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 6.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

Nissan Chemical Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from ¥28.00 total annually to ¥164.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. 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.

We Could See Nissan Chemical's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. For example, we've picked out 1 warning sign for Nissan Chemical 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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