NCD (TSE:4783) Is Increasing Its Dividend To ¥34.00

NCD Co., Ltd. (TSE:4783) will increase its dividend from last year's comparable payment on the 1st of July to ¥34.00. This will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that NCD's stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for NCD

NCD's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, NCD was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 8.2% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

NCD Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥50.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

NCD Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. NCD has impressed us by growing EPS at 8.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for NCD's prospects of growing its dividend payments in the future.

NCD Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that NCD is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for NCD (of which 1 is potentially serious!) you should know about. Is NCD not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.