Nintendo (TSE:7974) Will Pay A Larger Dividend Than Last Year At ¥139.00
The board of Nintendo Co., Ltd. (TSE:7974) has announced that it will be paying its dividend of ¥139.00 on the 30th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.
Nintendo's Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Nintendo's dividend was only 40% of earnings, however it was paying out 158% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Looking forward, earnings per share is forecast to rise by 15.7% over the next year. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Nintendo
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 annual payment back then was ¥13.00, compared to the most recent full-year payment of ¥181.00. This means that it has been growing its distributions at 30% per annum over that time. 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's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nintendo hasn't seen much change in its earnings per share over the last five years.
Nintendo's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Nintendo's payments are rock solid. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Nintendo that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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