Nippon Electric Glass (TSE:5214) Is Paying Out A Larger Dividend Than Last Year

Nippon Electric Glass Co., Ltd. (TSE:5214) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of September to ¥70.00. This will take the annual payment to 4.3% of the stock price, which is above what most companies in the industry pay.

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Nippon Electric Glass' Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Nippon Electric Glass isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS is forecast to rise by 35.8%. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

View our latest analysis for Nippon Electric Glass

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ¥80.00 total annually to ¥145.00. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Nippon Electric Glass Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Nippon Electric Glass has seen EPS rising for the last five years, at 9.2% per annum. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

Our Thoughts On Nippon Electric Glass' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Nippon Electric Glass' payments are rock solid. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Nippon Electric Glass that investors need to be conscious of moving forward. Is Nippon Electric Glass not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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