Nihon Nohyaku (TSE:4997) Has Announced A Dividend Of ¥10.00

Nihon Nohyaku Co., Ltd. (TSE:4997) will pay a dividend of ¥10.00 on the 20th of June. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

View our latest analysis for Nihon Nohyaku

Nihon Nohyaku's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Nihon Nohyaku'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.

Looking forward, earnings per share could rise by 11.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥13.00 in 2015, and the most recent fiscal year payment was ¥20.00. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Nihon Nohyaku has impressed us by growing EPS at 12% per year over the past five years. Nihon Nohyaku definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Nihon Nohyaku Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Nihon Nohyaku that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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