Nippon Chemiphar (TSE:4539) Is Due To Pay A Dividend Of ¥50.00

The board of Nippon Chemiphar Co., Ltd. (TSE:4539) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥50.00 per share. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.

View our latest analysis for Nippon Chemiphar

Nippon Chemiphar Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Nippon Chemiphar is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share could 27.8% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ¥100.00 total annually to ¥50.00. This works out to be a decline of approximately 6.7% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 28% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Nippon Chemiphar's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Nippon Chemiphar make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

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 identified 3 warning signs for Nippon Chemiphar (2 can't be ignored!) that you should be aware of before investing. 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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