NPC (TSE:6255) Has Announced A Dividend Of ¥10.00

The board of NPC Incorporated (TSE:6255) has announced that it will pay a dividend on the 1st of December, with investors receiving ¥10.00 per share. This means the annual payment is 1.6% of the current stock price, which is above the average for the industry.

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NPC's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, NPC's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 10.4% over the next year. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for NPC

NPC's Dividend Has Lacked Consistency

NPC has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of ¥2.00 in 2018 to the most recent total annual payment of ¥10.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. NPC has seen EPS rising for the last five years, at 24% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like NPC's Dividend

Overall, we like to see the dividend staying consistent, and we think NPC might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, NPC has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is NPC 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.