Nippon Primex (TSE:2795) Is Due To Pay A Dividend Of ¥25.00

The board of Nippon Primex Inc. (TSE:2795) has announced that it will pay a dividend of ¥25.00 per share 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

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Nippon Primex's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 0.4% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 33%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Nippon Primex May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. 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

Overall, we think Nippon Primex is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Nippon Primex that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.