Nikkato's (TSE:5367) Dividend Will Be ¥11.00

The board of Nikkato Corporation (TSE:5367) has announced that it will pay a dividend of ¥11.00 per share on the 23rd of June. Based on this payment, the dividend yield on the company's stock will be 3.5%, which is an attractive boost to shareholder returns.

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Nikkato'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. Based on the last payment, Nikkato was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 5.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 53%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

View our latest analysis for Nikkato

Nikkato's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2022, the annual payment back then was ¥24.00, compared to the most recent full-year payment of ¥21.00. The dividend has shrunk at around 4.4% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

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. In the last five years, Nikkato's earnings per share has shrunk at approximately 5.6% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Nikkato is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Nikkato (of which 1 is concerning!) you should know about. Is Nikkato 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.