Nihon Nohyaku (TSE:4997) Is Increasing Its Dividend To ¥10.00

Nihon Nohyaku Co., Ltd. (TSE:4997) will increase its dividend from last year's comparable payment on the 6th of December to ¥10.00. This will take the dividend yield to an attractive 2.9%, providing a nice boost to shareholder returns.

See our latest analysis for Nihon Nohyaku

Nihon Nohyaku'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. Based on the last payment, Nihon Nohyaku was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 8.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥9.00 in 2014 to the most recent total annual payment of ¥20.00. This means that it has been growing its distributions at 8.3% per annum over that time. 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.

Nihon Nohyaku Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Nihon Nohyaku has impressed us by growing EPS at 8.4% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nihon Nohyaku's prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Nihon Nohyaku will make a great income stock. While Nihon Nohyaku is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. For instance, we've picked out 1 warning sign for Nihon Nohyaku that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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