Is Nintendo a Good Dividend Stock? A Comprehensive Analysis
Is Nintendo (NTDOY) a good dividend stock? The answer is nuanced and depends on your specific investment goals and risk tolerance. While Nintendo offers a relatively modest dividend yield compared to some other established dividend payers, it presents a unique investment proposition. Its consistent profitability, solid balance sheet, and increasing dividend payments make it worth considering for investors seeking a blend of growth and income. However, it’s not a straightforward income play like some traditional dividend aristocrats. Its attractiveness as a dividend stock is tied to its potential for stock appreciation and the understanding of its somewhat cyclical business model.
Nintendo’s Dividend Profile
Dividend Yield & Payouts
Currently, Nintendo (NTDOY) has a dividend yield of approximately 2.24%, a figure that’s subject to fluctuation based on market conditions. The company has been distributing dividends twice a year, typically in June and December. Recent payouts have been around $0.15 per share. While this isn’t exceptionally high, the company has shown a commitment to increasing its dividend payments over the past year. This upward trend in payouts indicates a positive outlook and increasing profitability, making it potentially attractive to dividend growth investors.
It is important to note that Nintendo trades on the US market as American Depository Receipts (ADRs). These are issued for foreign companies, meaning that the actual dividends paid can fluctuate based on the exchange rate between the Japanese Yen and the US Dollar. Therefore, while the dividend yield is expressed as 2.24% in US Dollar terms, investors may receive slightly less or more due to foreign currency fluctuations.
Ex-Dividend Date
The last ex-dividend date for Nintendo was March 30, 2023. Knowing the ex-dividend date is crucial for investors. To be eligible for a dividend payout, an investor must own the stock before this date. Those who purchase the stock on or after the ex-dividend date will not receive the next payout.
Dividend Consistency
Nintendo’s dividend payout is not as consistent as some of the established dividend stalwarts like Johnson & Johnson (JNJ) or Procter & Gamble (PG). Although they make payments twice per year, the size of those payments may vary. This is largely because Nintendo’s profitability is tied to the success of their gaming consoles and software releases, which may fluctuate depending on market trends and consumer behavior. Therefore, Nintendo is not a typical “set it and forget it” dividend stock.
The Case for Nintendo as a Dividend Stock
Strong Financial Health
Nintendo possesses a robust financial position characterized by substantial cash reserves, significant investments, and an enviable absence of debt. This financial stability provides a firm foundation for consistently maintaining and potentially increasing dividend payouts. The company’s prudent financial management provides a level of security and comfort to investors.
Growth Potential
While a dividend is nice, what really makes Nintendo potentially lucrative is its growth potential. The success of their products, particularly the Nintendo Switch, has driven significant revenue growth. This suggests that the potential for dividend increases remains substantial, especially as the company leverages its strong brand and loyal customer base.
Investor Sentiment
The current investor sentiment towards Nintendo appears to be positive. Stock price forecasts for the next 12 months project a potential median increase of over 300% from the previous share price. While such forecasts should be taken with a grain of salt, this demonstrates a very positive outlook on the company’s future growth and therefore dividend potential. This positive forecast, along with buy signals from both short- and long-term Moving Averages, indicates a favorable investment outlook for Nintendo.
Considerations Before Investing
Market Volatility
The gaming industry is subject to market trends, and Nintendo’s performance is heavily influenced by the cyclical nature of console launches and game releases. This introduces a level of volatility that may not be suitable for investors seeking predictable and stable dividend income.
Currency Risk
As previously mentioned, investing in Nintendo as an ADR introduces currency risk. Fluctuations in the Japanese Yen against the US Dollar can affect both share price and the value of dividend payments. This risk is something potential investors need to consider.
Not a Pure Dividend Play
Nintendo is more accurately described as a growth-oriented company that also pays a dividend, rather than a pure dividend play. If you’re solely looking for a high-yield dividend stock to live off, other companies might be more suitable.
Conclusion
Nintendo’s potential as a dividend stock is intertwined with its growth trajectory. While its current dividend yield may not be the highest, the company’s strong financial position, potential for increased dividends, and overall positive forecast present a compelling case for investors seeking a blend of growth and income. However, investors must be aware of the potential volatility and currency risks. Therefore, Nintendo may be suitable for a well-diversified portfolio as a potential growth stock with a dividend component, but should not be the core of a dividend income-seeking strategy.
Frequently Asked Questions (FAQs)
1. What is Nintendo’s current dividend yield?
Nintendo’s current annual dividend yield is around 2.24%. This can fluctuate depending on stock price changes.
2. How often does Nintendo pay dividends?
Nintendo distributes dividends twice a year, typically in June and December.
3. When was Nintendo’s last ex-dividend date?
The last ex-dividend date was March 30, 2023.
4. How much did Nintendo pay per share in the last year?
Nintendo paid roughly $0.15 per share in the most recent payouts. The previous year payments totaled $0.21.
5. What is considered a good dividend yield?
The average dividend yield for S&P 500 companies that pay a dividend is typically between 2% and 5%. A dividend yield above 8% should be researched carefully as it may indicate financial troubles.
6. Is Nintendo considered a buy, sell, or hold?
Currently, Nintendo stock holds buy signals from both short and long-term Moving Averages, suggesting a positive forecast.
7. What are some of the most reliable dividend stocks?
Some of the most reliable dividend stocks include Johnson & Johnson (JNJ), The Procter & Gamble Company (PG), and Chevron Corporation (CVX) due to their consistent dividend growth over decades.
8. What are some of the safest dividend stocks?
Safe dividend stocks that have made payments for decades include Eli Lilly (LLY), Coca-Cola (KO), and Microsoft (MSFT).
9. What are Nintendo’s ADRs and how do they work?
Nintendo has two ADRs traded in the US: NTDOY and NTDOF. NTDOY represents 1/8 of one Nintendo share traded in Japan, whereas NTDOF represents one regular share. U.S. investors can acquire Nintendo stock by purchasing these ADRs.
10. Who is the largest shareholder of Nintendo outside of the company itself?
Saudi Arabia’s Public Investment Fund (PIF) is the largest shareholder of Nintendo outside of the company, owning over 8% of the stock.
11. Why is Nintendo’s dividend relatively high?
Nintendo’s dividend has been relatively high recently because their profits have been rising as the installed base of Switch owners buys more games.
12. What is the forecast for Nintendo’s stock price?
Analysts’ median forecast for Nintendo’s stock price in 12 months is 47.04, with a high estimate of 59.00 and a low of 31.78.
13. What are some downsides of high-dividend stocks?
Sometimes a high dividend yield can indicate a company facing financial issues. It might not be sustainable.
14. What are growth stocks?
Unlike dividend stocks, growth stocks reinvest all excess return back into the company, with no periodic payouts to shareholders.
15. What are some of the best dividend stocks for passive income?
Some of the best dividend stocks for passive income include The Procter & Gamble Company (PG), Colgate-Palmolive Company (CL), and PepsiCo, Inc. (PEP), due to their consistent payout increases over time.