Nihon Parkerizing (TSE:4095) Is Increasing Its Dividend To ¥25.00

Nihon Parkerizing Co., Ltd. (TSE:4095) will increase its dividend on the 9th of December to ¥25.00, which is 25% higher than last year's payment from the same period of ¥20.00. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Nihon Parkerizing

Nihon Parkerizing's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Nihon Parkerizing's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 3.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Nihon Parkerizing Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥15.00 in 2014 to the most recent total annual payment of ¥40.00. This means that it has been growing its distributions at 10% per annum 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.

Nihon Parkerizing May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.2% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Nihon Parkerizing could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Nihon Parkerizing's Dividend

Overall, a dividend increase is always good, and we think that Nihon Parkerizing is a strong income stock thanks to its track record and growing earnings. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Nihon Parkerizing 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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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.