NEXTAGE (TSE:3186) Is Increasing Its Dividend To ¥33.00

NEXTAGE Co., Ltd.'s (TSE:3186) dividend will be increasing from last year's payment of the same period to ¥33.00 on 26th of February. This makes the dividend yield 2.3%, which is above the industry average.

View our latest analysis for NEXTAGE

NEXTAGE's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, NEXTAGE's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 28.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

NEXTAGE Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥1.00 in 2014 to the most recent total annual payment of ¥33.00. This implies that the company grew its distributions at a yearly rate of about 42% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. NEXTAGE has impressed us by growing EPS at 11% per year over the past five years. NEXTAGE definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While NEXTAGE is earning enough to cover the payments, the cash flows are lacking. We don't think NEXTAGE is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, NEXTAGE has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is NEXTAGE 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.