NEXTAGE's (TSE:3186) Shareholders Will Receive A Bigger Dividend Than Last Year

NEXTAGE Co., Ltd.'s (TSE:3186) dividend will be increasing from last year's payment of the same period to ¥34.00 on 25th of February. This makes the dividend yield 1.8%, which is above the industry average.

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NEXTAGE's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, NEXTAGE was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 18.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for NEXTAGE

NEXTAGE Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥1.00 in 2015 to the most recent total annual payment of ¥34.00. 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. It's encouraging to see that NEXTAGE has been growing its earnings per share at 30% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think NEXTAGE's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for NEXTAGE (1 shouldn't be ignored!) that you should be aware of before investing. 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.