Nitori Holdings (TSE:9843) Is Paying Out A Larger Dividend Than Last Year

The board of Nitori Holdings Co., Ltd. (TSE:9843) has announced that it will be paying its dividend of ¥77.00 on the 3rd of December, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.2%.

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Nitori Holdings' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, based ont he last payment, Nitori Holdings was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to expand by 5.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

View our latest analysis for Nitori Holdings

Nitori Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥154.00. This means that it has been growing its distributions at 9.9% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.8% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Nitori Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nitori Holdings' payments are rock solid. While Nitori Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Nitori Holdings analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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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.