Nissin Foods HoldingsLtd (TSE:2897) Is Due To Pay A Dividend Of ¥35.00

Nissin Foods Holdings Co.,Ltd. (TSE:2897) will pay a dividend of ¥35.00 on the 29th of June. The dividend yield will be 2.4% based on this payment which is still above the industry average.

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Nissin Foods HoldingsLtd's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Nissin Foods HoldingsLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 8.1%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Nissin Foods HoldingsLtd

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. The dividend has gone from an annual total of ¥26.67 in 2016 to the most recent total annual payment of ¥70.00. This means that it has been growing its distributions at 10% per annum 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 Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Nissin Foods HoldingsLtd has been growing its earnings per share at 6.9% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Nissin Foods HoldingsLtd's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nissin Foods HoldingsLtd's payments, as there could be some issues with sustaining them into the future. While Nissin Foods HoldingsLtd is earning enough to cover the payments, the cash flows are lacking. We don't think Nissin Foods HoldingsLtd is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Nissin Foods HoldingsLtd that investors should know about before committing capital to this stock. 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.