Nippon Yusen Kabushiki Kaisha (TSE:9101) Has Announced A Dividend Of ¥130.00

The board of Nippon Yusen Kabushiki Kaisha (TSE:9101) has announced that it will pay a dividend of ¥130.00 per share on the 20th of June. This will take the dividend yield to an attractive 5.2%, providing a nice boost to shareholder returns.

View our latest analysis for Nippon Yusen Kabushiki Kaisha

Nippon Yusen Kabushiki Kaisha's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Nippon Yusen Kabushiki Kaisha's dividend was only 26% of earnings, however it was paying out 181% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

EPS is set to fall by 19.0% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 48%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ¥13.33 total annually to ¥260.00. This means that it has been growing its distributions at 35% per annum 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Nippon Yusen Kabushiki Kaisha has impressed us by growing EPS at 26% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nippon Yusen Kabushiki Kaisha'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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 identified 2 warning signs for Nippon Yusen Kabushiki Kaisha (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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