Nippon Densetsu Kogyo's (TSE:1950) Upcoming Dividend Will Be Larger Than Last Year's

Nippon Densetsu Kogyo Co., Ltd. (TSE:1950) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of June to ¥92.00. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

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Nippon Densetsu Kogyo's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Nippon Densetsu Kogyo was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 2.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Nippon Densetsu Kogyo

Nippon Densetsu Kogyo Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2016, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥92.00. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Nippon Densetsu Kogyo Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Nippon Densetsu Kogyo has seen EPS rising for the last five years, at 6.4% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Nippon Densetsu Kogyo's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Nippon Densetsu Kogyo that investors should take into consideration. 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.