Ad-Sol Nissin (TSE:3837) Has Announced A Dividend Of ¥25.00

Ad-Sol Nissin Corporation (TSE:3837) has announced that it will pay a dividend of ¥25.00 per share on the 27th of June. This will take the annual payment to 2.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Ad-Sol Nissin

Ad-Sol Nissin's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 158% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 4.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Ad-Sol Nissin Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of ¥33.00 in 2020 to the most recent total annual payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 4.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 4.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

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

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Ad-Sol Nissin (1 is a bit unpleasant!) that you should be aware of before investing. Is Ad-Sol Nissin 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.