Nihon Flush (TSE:7820) Will Pay A Dividend Of ¥18.00
Nihon Flush Co., Ltd. (TSE:7820) has announced that it will pay a dividend of ¥18.00 per share on the 5th of June. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.
Nihon Flush's Distributions May Be Difficult To Sustain
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Nihon Flush is unprofitable despite paying a dividend, and it is paying out 226% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.
Over the next year, EPS might fall by 46.9% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.
See our latest analysis for Nihon Flush
Nihon Flush Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥36.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 47% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nihon Flush's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Nihon Flush that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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