Nippon Signal (TSE:6741) Will Pay A Dividend Of ¥10.00

Nippon Signal Co., Ltd. (TSE:6741) has announced that it will pay a dividend of ¥10.00 per share on the 2nd of December. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Nippon Signal

Nippon Signal's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Nippon Signal was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 1.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Nippon Signal Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from ¥13.00 total annually to ¥31.00. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Nippon Signal May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Nippon Signal hasn't seen much change in its earnings per share over the last five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

We Really Like Nippon Signal's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Nippon Signal that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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