Nippon Fine Chemical (TSE:4362) Is Increasing Its Dividend To ¥37.00

Nippon Fine Chemical Co., Ltd.'s (TSE:4362) dividend will be increasing from last year's payment of the same period to ¥37.00 on 2nd of December. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.

See our latest analysis for Nippon Fine Chemical

Nippon Fine Chemical's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Nippon Fine Chemical's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 9.3% over the next year. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

Nippon Fine Chemical Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥20.00 total annually to ¥74.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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.

Nippon Fine Chemical Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nippon Fine Chemical has seen EPS rising for the last five years, at 8.8% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Nippon Fine Chemical Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Nippon Fine Chemical 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. All in all, this checks a lot of the boxes we look for when choosing an 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. Now, if you want to look closer, it would be worth checking out our free research on Nippon Fine Chemical management tenure, salary, and performance. Is Nippon Fine Chemical not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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