Nippon Yusen Kabushiki Kaisha's (TSE:9101) Dividend Will Be ¥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 7.0%, providing a nice boost to shareholder returns.

See our latest analysis for Nippon Yusen Kabushiki Kaisha

Nippon Yusen Kabushiki Kaisha's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Nippon Yusen Kabushiki Kaisha's dividend was only 20% of earnings, however it was paying out 247% 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.

Over the next year, EPS is forecast to fall by 18.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 38%, 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 2015, the annual payment back then was ¥16.67, compared to the most recent full-year payment of ¥360.00. This implies that the company grew its distributions at a yearly rate of about 36% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. We are encouraged to see that Nippon Yusen Kabushiki Kaisha has grown earnings per share at 20% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nippon Yusen Kabushiki Kaisha's prospects of growing its dividend payments in the future.

Our Thoughts On Nippon Yusen Kabushiki Kaisha's Dividend

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 Nippon Yusen Kabushiki Kaisha is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Nippon Yusen Kabushiki Kaisha (of which 1 makes us a bit uncomfortable!) you should know about. 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.