Nippo's (TSE:9913) Shareholders Will Receive A Bigger Dividend Than Last Year

Nippo Ltd.'s (TSE:9913) dividend will be increasing from last year's payment of the same period to ¥78.00 on 15th of July. This will take the dividend yield to an attractive 2.9%, providing a nice boost to shareholder returns.

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Nippo's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Nippo's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 29.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

View our latest analysis for Nippo

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 ¥15.00 in 2015, and the most recent fiscal year payment was ¥78.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nippo has impressed us by growing EPS at 30% per year over the past five years. Nippo is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Nippo's Dividend

Overall, a dividend increase is always good, and we think that Nippo is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Nippo that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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