Nippon Shinyaku (TSE:4516) Has Affirmed Its Dividend Of ¥62.00

The board of Nippon Shinyaku Co., Ltd. (TSE:4516) has announced that it will pay a dividend of ¥62.00 per share on the 5th of December. The dividend yield will be 3.9% based on this payment which is still above the industry average.

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Nippon Shinyaku's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Nippon Shinyaku was paying a whopping 627% as a dividend, but this only made up 27% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to fall by 6.0%. If the dividend continues along recent trends, we estimate the payout ratio could be 31%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Nippon Shinyaku

Nippon Shinyaku Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥25.00 total annually to ¥124.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nippon Shinyaku has impressed us by growing EPS at 14% 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.

Our Thoughts On Nippon Shinyaku's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nippon Shinyaku's payments, as there could be some issues with sustaining them into the future. While Nippon Shinyaku is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Nippon Shinyaku has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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