Nippon Yusen Kabushiki Kaisha's (TSE:9101) Dividend Will Be ¥80.00

The board of Nippon Yusen Kabushiki Kaisha (TSE:9101) has announced that it will pay a dividend of ¥80.00 per share on the 2nd of December. Based on this payment, the dividend yield for the company will be 3.3%, which is fairly typical for the industry.

Check out our latest analysis for Nippon Yusen Kabushiki Kaisha

Nippon Yusen Kabushiki Kaisha's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Nippon Yusen Kabushiki Kaisha was paying only paying out a fraction of earnings, but the payment was a massive 112% of 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.

EPS is set to fall by 13.1% 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥13.33 total annually to ¥160.00. This means that it has been growing its distributions at 28% per annum over that time. Nippon Yusen Kabushiki Kaisha has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Nippon Yusen Kabushiki Kaisha has grown earnings per share at 43% per year over the past five years. 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 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Nippon Yusen Kabushiki Kaisha (of which 1 doesn't sit too well with us!) 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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