Nakabayashi (TSE:7987) Has Announced A Dividend Of ¥12.00
Nakabayashi Co., Ltd. (TSE:7987) has announced that it will pay a dividend of ¥12.00 per share on the 30th of June. Based on this payment, the dividend yield on the company's stock will be 3.8%, which is an attractive boost to shareholder returns.
Nakabayashi's Projected Earnings Seem Likely To Cover Future Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Nakabayashi's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 2.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Nakabayashi
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ¥12.00 total annually to ¥22.00. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Nakabayashi May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 2.6% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Nakabayashi could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Nakabayashi's Dividend
Overall, we think Nakabayashi is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Nakabayashi that investors should know about before committing capital to this stock. 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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