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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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.
About TSE:3837
Ad-Sol Nissin
Develops information and embedded systems for companies in Japan.
Flawless balance sheet with proven track record.
