Nippon Carbide Industries' (TSE:4064) Dividend Will Be ¥41.00

Nippon Carbide Industries Co., Inc. (TSE:4064) has announced that it will pay a dividend of ¥41.00 per share on the 30th of June. This will take the dividend yield to an attractive 3.4%, providing a nice boost to shareholder returns.

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Nippon Carbide Industries' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Nippon Carbide Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 10.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

See our latest analysis for Nippon Carbide Industries

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥20.00 total annually to ¥82.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Nippon Carbide Industries has been growing its earnings per share at 21% a 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.

Nippon Carbide Industries Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Nippon Carbide Industries that you should be aware of before investing. Is Nippon Carbide Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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