Nippon Fine Chemical (TSE:4362) Will Pay A Larger Dividend Than Last Year At ¥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 dividend yield to 2.8%, which shareholders will be pleased with.

See our latest analysis for Nippon Fine Chemical

Nippon Fine Chemical's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Nippon Fine Chemical'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 is forecast to expand by 9.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Nippon Fine Chemical Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥74.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Nippon Fine Chemical's Dividend

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Nippon Fine Chemical stock. 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.

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