Nippon Light Metal Holdings Company (TSE:5703) Is Due To Pay A Dividend Of ¥25.00

The board of Nippon Light Metal Holdings Company, Ltd. (TSE:5703) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥25.00 per share. This takes the dividend yield to 4.4%, which shareholders will be pleased with.

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Nippon Light Metal Holdings Company's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Nippon Light Metal Holdings Company is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 10.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Nippon Light Metal Holdings Company

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥50.00 in 2015, and the most recent fiscal year payment was ¥80.00. This means that it has been growing its distributions at 4.8% per annum over that time. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Nippon Light Metal Holdings Company has grown earnings per share at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nippon Light Metal Holdings Company's prospects of growing its dividend payments in the future.

Our Thoughts On Nippon Light Metal Holdings Company's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Nippon Light Metal Holdings Company is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Nippon Light Metal Holdings Company has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Nippon Light Metal Holdings Company not quite the opportunity you were looking for? Why not check out our selection of top 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.