Nihon Kagaku Sangyo (TSE:4094) Is Due To Pay A Dividend Of ¥30.00

The board of Nihon Kagaku Sangyo Co., Ltd. (TSE:4094) has announced that it will pay a dividend of ¥30.00 per share on the 5th of June. The dividend yield will be 3.8% based on this payment which is still above the industry average.

See our latest analysis for Nihon Kagaku Sangyo

Nihon Kagaku Sangyo's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Nihon Kagaku Sangyo's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 2.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Nihon Kagaku Sangyo 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. The dividend has gone from an annual total of ¥18.00 in 2015 to the most recent total annual payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, Nihon Kagaku Sangyo has only grown its earnings per share at 2.9% per annum over the past five years. Growth of 2.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

We Really Like Nihon Kagaku Sangyo's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Nihon Kagaku Sangyo in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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