Nippon Shokubai (TSE:4114) Has Announced A Dividend Of ¥54.00

Nippon Shokubai Co., Ltd. (TSE:4114) will pay a dividend of ¥54.00 on the 23rd of June. This means the annual payment is 5.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Nippon Shokubai

Estimates Indicate Nippon Shokubai's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, based ont he last payment, Nippon Shokubai was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

The next 12 months is set to see EPS grow by 9.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 102%, which probably can't continue without putting some pressure on the balance sheet.

Nippon Shokubai 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 2015, the annual payment back then was ¥27.50, compared to the most recent full-year payment of ¥108.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 4.1% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Nippon Shokubai has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Nippon Shokubai's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Nippon Shokubai for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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