Ought to Nippon Antenna Co., Ltd. (TYO: 6930) Will you be a part of your dividend portfolio?
Dividend-paying stocks such as Nippon Antenna Co., Ltd. (TYO: 6930) are typically popular with investors, and for good reason – some research suggests that a significant portion of all stock market returns come from reinvested dividends. However, sometimes investors buy a popular dividend stock for its yield and then lose money if the company’s dividend doesn’t live up to expectations.
A low return of 2.1% is hard to impress, but the long payment history is respectable. At the right price or with strong growth opportunities, Nippon AntennaLtd could have potential. Some simple research can reduce the risk of buying Nippon AntennaLtd for its dividend – read on to find out more.
Check out this interactive diagram for our latest analysis on Nippon AntennaLtd!
JASDAQ: 6930 historic dividend March 25, 2021
Dividends are typically paid out of corporate profits. When a company pays more dividends than it earns, the dividend can no longer be sustainable – hardly an ideal situation. Hence, we should always examine whether a company can afford its dividend, measured as a percentage of a company’s net income after tax. If we look at the data, we can see that 52% of Nippon AntennaLtd’s profits over the past 12 months have been paid out as dividends. This is a pretty normal payout ratio for most companies. It allows a higher dividend to be paid to shareholders, but limits the capital remaining in the business – which can be good or bad.
Aside from comparing dividends against earnings, let’s check if the company has generated enough cash to pay its dividend. Of the free cash flow generated last year, Nippon AntennaLtd paid out 43% as dividend, suggesting the dividend is affordable. It is gratifying to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend will be sustainable as long as earnings don’t fall steeply.
With strong net cash, Nippon AntennaLtd investors don’t need to worry much in the short term from a dividend perspective.
We update our data on Nippon AntennaLtd every 24 hours so you always get our latest analysis of Nippon AntennaLtd’s financial health here.
Volatility of the dividend
From the standpoint of a high-income investor looking to earn years of dividends, it doesn’t make much sense to buy a stock if its dividend is cut regularly or if it’s not reliable. Nippon AntennaLtd has been paying dividends for a long time, but for the purposes of this analysis we’re only examining the past 10 years of payments. That dividend was unstable in what we define as being cut once or several times during that time. For the past 10 years, the first annual payment in 2011 was JPY 25.0, compared to JPY 21.0 the previous year. The dividend fell by around 1.7% per year during this period. Nippon AntennaLtd’s dividend hasn’t declined linearly to 1.7% a year, but the CAGR is a useful estimate of the rate of change in history.
A shrinking dividend over a 10 year period is not ideal, and we would be concerned about investing in a dividend stock that doesn’t have a solid record of growing dividends per share.
Dividend growth potential
With a relatively unstable dividend, it’s even more important to assess whether earnings per share (EPS) is growing – it’s not worth taking the risk of a dividend cut unless you may be rewarded with higher dividends in the future. It’s good to see that Nippon AntennaLtd has increased earnings per share by 22% per year over the past five years. With the recent rapid growth in earnings per share and a payout ratio of 52%, this business seems like an interesting prospect if earnings are effectively reinvested.
When we look at a dividend stock, we need to judge whether the dividend will rise, whether the company can hold it in a wide variety of economic circumstances, and whether the dividend payout is sustainable. First, we believe that Nippon AntennaLtd has an acceptable payout ratio and that its dividend is well covered by cash flow. We were also happy that earnings were up, but it was worrying that the dividend has been cut at least once in the past. Overall, we think Nippon AntennaLtd is an interesting dividend stock, although it could be better.
Investors generally tend to prefer companies with a consistent, stable dividend policy over companies with an erratic dividend policy. However, there are other considerations for investors to consider when analyzing stock performance. For example, we chose 3 warning signs for Nippon AntennaLtd Investors should know this before investing capital in this stock.
We’ve also compiled a list of global stocks with market capitalizations over $ 1 billion and yields in excess of 3%.
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This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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