Stock Analysis

Nippon Shinyaku (TSE:4516) Will Pay A Dividend Of ¥62.00

TSE:4516
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The board of Nippon Shinyaku Co., Ltd. (TSE:4516) has announced that it will pay a dividend of ¥62.00 per share on the 1st of July. This makes the dividend yield about the same as the industry average at 2.6%.

Check out our latest analysis for Nippon Shinyaku

Nippon Shinyaku's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Nippon Shinyaku was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise by 48.8% over the next year. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

historic-dividend
TSE:4516 Historic Dividend February 26th 2024

Nippon Shinyaku Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥23.00 total annually to ¥124.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Nippon Shinyaku has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Nippon Shinyaku analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Nippon Shinyaku 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.