Nishi-Nippon Railroad's (TSE:9031) Dividend Will Be ¥17.50

The board of Nishi-Nippon Railroad Co., Ltd. (TSE:9031) has announced that it will pay a dividend of ¥17.50 per share on the 2nd of December. This means the annual payment is 1.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Nishi-Nippon Railroad

Nishi-Nippon Railroad's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Nishi-Nippon Railroad was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 4.0% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 17%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥30.00 total annually to ¥35.00. This means that it has been growing its distributions at 1.6% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Nishi-Nippon Railroad has seen EPS rising for the last five years, at 26% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Nishi-Nippon Railroad Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Nishi-Nippon Railroad might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Nishi-Nippon Railroad (2 can't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.