Nippon Primex (TSE:2795) Has Announced A Dividend Of ¥25.00

Nippon Primex Inc. (TSE:2795) will pay a dividend of ¥25.00 on the 25th of June. This means the dividend yield will be fairly typical at 3.0%.

See our latest analysis for Nippon Primex

Nippon Primex's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Nippon Primex's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 0.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 33%, which is definitely feasible to continue.

Nippon Primex Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥25.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Although it's important to note that Nippon Primex's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Nippon Primex that investors need to be conscious of moving forward. Is Nippon Primex not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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