Nomura Real Estate Holdings' (TSE:3231) Dividend Will Be Increased To ¥82.50

Nomura Real Estate Holdings, Inc. (TSE:3231) will increase its dividend from last year's comparable payment on the 2nd of December to ¥82.50. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Nomura Real Estate Holdings

Nomura Real Estate Holdings' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Nomura Real Estate Holdings' dividend was only 36% of earnings, however it was paying out 586% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 4.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Nomura Real Estate Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥30.00 in 2014, and the most recent fiscal year payment was ¥165.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Nomura Real Estate Holdings' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nomura Real Estate Holdings has seen EPS rising for the last five years, at 9.9% 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 probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Nomura Real Estate Holdings (of which 1 makes us a bit uncomfortable!) you should know about. Is Nomura Real Estate Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com