NEC Capital Solutions' (TSE:8793) Dividend Will Be ¥75.00

The board of NEC Capital Solutions Limited (TSE:8793) has announced that it will pay a dividend of ¥75.00 per share on the 5th of June. This means that the annual payment will be 3.7% of the current stock price, which is in line with the average for the industry.

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NEC Capital Solutions' Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, NEC Capital Solutions was earning enough to cover the dividend, but it wasn't generating any free cash flows. 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 could rise by 50.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for NEC Capital Solutions

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 ¥44.00 in 2015 to the most recent total annual payment of ¥150.00. This means that it has been growing its distributions at 13% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. We are encouraged to see that NEC Capital Solutions has grown earnings per share at 50% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that NEC Capital Solutions could prove to be a strong dividend payer.

Our Thoughts On NEC Capital Solutions' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NEC Capital Solutions' payments, as there could be some issues with sustaining them into the future. While NEC Capital Solutions is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for NEC Capital Solutions you should be aware of, and 1 of them is a bit concerning. Is NEC Capital Solutions 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.