Nichiha (TSE:7943) Is Due To Pay A Dividend Of ¥57.00
Nichiha Corporation (TSE:7943) will pay a dividend of ¥57.00 per share on June 26, yielding 3.7%. The company has a history of covering its dividend with earnings, but a cash payout ratio of 79% indicates a focus on shareholder returns over growth. EPS is forecasted to grow by 30.8% next year, potentially lowering the payout ratio to 54%. However, past dividend cuts raise concerns about sustainability. Despite a CAGR of 16% in dividends since 2015, earnings per share have declined by 8.7% annually over five years, making future dividend growth uncertain. Investors should be cautious.
The board of Nichiha Corporation (TSE:7943) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥57.00 per share. Based on this payment, the dividend yield on the company's stock will be 3.7%, which is an attractive boost to shareholder returns.
View our latest analysis for Nichiha
Nichiha's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Nichiha was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 79% indicates it is more focused on returning cash to shareholders than growing the business.
Over the next year, EPS is forecast to expand by 30.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥25.00 in 2015 to the most recent total annual payment of ¥114.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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.
Dividend Growth Is Doubtful
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. Nichiha has seen earnings per share falling at 8.7% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nichiha's payments, as there could be some issues with sustaining them into the future. While Nichiha is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Nichiha is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Nichiha that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
