Nitta (TSE:5186) Has Announced A Dividend Of ¥72.00
Nitta Corporation (TSE:5186) has announced a dividend of ¥72.00 per share, payable on December 5, yielding 3.8%. While the dividend payout ratio is projected to be sustainable at 35% next year, concerns remain due to a high cash payout ratio of 1,632%. The company has a history of dividend cuts, but EPS has grown at 16% annually over the last five years. Despite the current dividend increase, Nitta may not be a strong income investment due to its inconsistent dividend policy and minimal cash reserves.
Nitta Corporation's (TSE:5186) investors are due to receive a payment of ¥72.00 per share on 5th of December. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.
AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.
Nitta's Projected Earnings Seem Likely To Cover Future Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Nitta's dividend was only 32% of earnings, however it was paying out 1,632% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
The next year is set to see EPS grow by 6.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Nitta
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. Since 2015, the dividend has gone from ¥38.00 total annually to ¥145.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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 see if earnings per share is growing. Nitta has seen EPS rising for the last five years, at 16% per annum. Nitta definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On Nitta's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Nitta 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.
