Nitto Denko (TSE:6988) Will Pay A Larger Dividend Than Last Year At ¥140.00

Nitto Denko Corporation (TSE:6988) will increase its dividend from last year's comparable payment on the 25th of November to ¥140.00. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

Check out our latest analysis for Nitto Denko

Nitto Denko's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Nitto Denko's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 5.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

Nitto Denko Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥100.00 in 2014 to the most recent total annual payment of ¥280.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Nitto Denko has grown earnings per share at 18% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Nitto Denko Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Nitto Denko is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Nitto Denko that investors need to be conscious of moving forward. Is Nitto Denko not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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