Nitto Denko's (TSE:6988) Upcoming Dividend Will Be Larger Than Last Year's

Nitto Denko Corporation (TSE:6988) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of November to ¥140.00. This makes the dividend yield about the same as the industry average at 2.7%.

Check out our latest analysis for Nitto Denko

Nitto Denko's Payment Has 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. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 5.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nitto Denko Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥100.00, compared to the most recent full-year payment of ¥280.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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.

We Really Like Nitto Denko's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Nitto Denko that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.