Ad-Sol Nissin's (TSE:3837) Dividend Will Be Increased To ¥23.00

Ad-Sol Nissin Corporation (TSE:3837) has announced that it will be increasing its periodic dividend on the 1st of July to ¥23.00, which will be 15% higher than last year's comparable payment amount of ¥20.00. This makes the dividend yield 2.4%, which is above the industry average.

Check out our latest analysis for Ad-Sol Nissin

Ad-Sol Nissin's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Ad-Sol Nissin was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 1.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

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

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the annual payment back then was ¥33.00, compared to the most recent full-year payment of ¥39.00. This means that it has been growing its distributions at 4.3% per annum over that time. Ad-Sol Nissin hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, Ad-Sol Nissin's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Ad-Sol Nissin is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Ad-Sol Nissin's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Ad-Sol Nissin 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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