Ad-Sol Nissin (TSE:3837) Will Pay A Larger Dividend Than Last Year At ¥35.00

Ad-Sol Nissin Corporation (TSE:3837) will increase its dividend from last year's comparable payment on the 27th of June to ¥35.00. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment was quite easily covered by earnings, but it made up 209% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share could rise by 5.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

View our latest analysis for Ad-Sol Nissin

Ad-Sol Nissin Doesn't Have A Long Payment History

It is great to see that Ad-Sol Nissin has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the dividend has gone from ¥33.00 total annually to ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

We Could See Ad-Sol Nissin's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Ad-Sol Nissin has impressed us by growing EPS at 5.8% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Ad-Sol Nissin's payments are rock solid. While Ad-Sol Nissin is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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 instance, we've picked out 1 warning sign for Ad-Sol Nissin that investors should take into consideration. 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.