NS Solutions (TSE:2327) Is Increasing Its Dividend To ¥40.00

The board of NS Solutions Corporation (TSE:2327) has announced that it will be paying its dividend of ¥40.00 on the 2nd of December, an increased payment from last year's comparable dividend. This makes the dividend yield 2.2%, which is above the industry average.

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NS Solutions' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, NS Solutions was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 8.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

See our latest analysis for NS Solutions

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥11.25 total annually to ¥80.00. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. 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.

We Could See NS Solutions' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that NS Solutions has grown earnings per share at 8.8% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On NS Solutions' Dividend

In summary, while it's always good to see the dividend being raised, we don't think NS Solutions' 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 NS Solutions 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 2 warning signs for NS Solutions (1 is a bit concerning!) that you should be aware of before investing. Is NS Solutions 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.