Nihon Nohyaku (TSE:4997) Has Announced That It Will Be Increasing Its Dividend To ¥15.00

Nihon Nohyaku Co., Ltd.'s (TSE:4997) dividend will be increasing from last year's payment of the same period to ¥15.00 on 19th of June. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

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Nihon Nohyaku's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. 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.

Over the next year, EPS could expand by 3.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Nihon Nohyaku

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥15.00 total annually to ¥30.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 3.4% per year. If Nihon Nohyaku is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Nihon Nohyaku you should be aware of, and 1 of them is potentially serious. Is Nihon Nohyaku not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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