Nippon Yusen Kabushiki Kaisha's (TSE:9101) Dividend Will Be ¥130.00

Nippon Yusen Kabushiki Kaisha's (TSE:9101) investors are due to receive a payment of ¥130.00 per share on 20th of June. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

View our latest analysis for Nippon Yusen Kabushiki Kaisha

Nippon Yusen Kabushiki Kaisha's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Nippon Yusen Kabushiki Kaisha was paying a whopping 181% as a dividend, but this only made up 26% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 14.2% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 45%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥13.33 total annually to ¥260.00. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nippon Yusen Kabushiki Kaisha has seen EPS rising for the last five years, at 26% per annum. 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.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good 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. 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 is potentially serious!) you should know about. Is Nippon Yusen Kabushiki Kaisha not quite the opportunity you were looking for? Why not check out our selection of top 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.