Nippon Chemiphar (TSE:4539) Is Paying Out A Dividend Of ¥50.00

Nippon Chemiphar Co., Ltd. (TSE:4539) will pay a dividend of ¥50.00 on the 24th of June. Based on this payment, the dividend yield on the company's stock will be 3.4%, which is an attractive boost to shareholder returns.

View our latest analysis for Nippon Chemiphar

Nippon Chemiphar Might Find It Hard To Continue The Dividend

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Nippon Chemiphar is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Recent, EPS has fallen by 31.2%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥100.00, compared to the most recent full-year payment of ¥50.00. This works out to be a decline of approximately 6.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Nippon Chemiphar's EPS has fallen by approximately 31% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of Nippon Chemiphar's Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Nippon Chemiphar (of which 3 make us uncomfortable!) you should know about. Is Nippon Chemiphar not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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