Nihon EnterpriseLtd (TSE:4829) Has Announced A Dividend Of ¥3.00

The board of Nihon Enterprise Co.,Ltd. (TSE:4829) has announced that it will pay a dividend on the 1st of September, with investors receiving ¥3.00 per share. The dividend yield will be 2.4% based on this payment which is still above the industry average.

See our latest analysis for Nihon EnterpriseLtd

Estimates Indicate Nihon EnterpriseLtd's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 108% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 62%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

If the company can't turn things around, EPS could fall by 8.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 118%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥2.00 in 2015, and the most recent fiscal year payment was ¥3.00. This means that it has been growing its distributions at 4.1% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Nihon EnterpriseLtd has seen earnings per share falling at 8.8% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 5 warning signs for Nihon EnterpriseLtd you should be aware of, and 2 of them are a bit unpleasant. Is Nihon EnterpriseLtd 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.