Nissin (TSE:9066) Will Pay A Dividend Of ¥100.00

Nissin Corporation's (TSE:9066) investors are due to receive a payment of ¥100.00 per share on 10th of June. This will take the annual payment to 4.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Nissin

Nissin's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Nissin's dividend was only 21% of earnings, however it was paying out 102% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 36.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Nissin Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥35.00 in 2014 to the most recent total annual payment of ¥200.00. This means that it has been growing its distributions at 19% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nissin has seen EPS rising for the last five years, at 36% 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nissin's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Nissin that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.