Nagase Brothers Inc. (TSE:9733) Passed Our Checks, And It's About To Pay A JP¥60.00 Dividend
Readers hoping to buy Nagase Brothers Inc. (TSE:9733) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Nagase Brothers investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the .
The company's upcoming dividend is JP¥60.00 a share, following on from the last 12 months, when the company distributed a total of JP¥120 per share to shareholders. Based on the last year's worth of payments, Nagase Brothers stock has a trailing yield of around 5.2% on the current share price of JP¥2310.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Nagase Brothers paid out 74% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 39% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Nagase Brothers's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for Nagase Brothers
Click here to see how much of its profit Nagase Brothers paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Nagase Brothers, with earnings per share up 10.0% on average over the last five years. Decent historical earnings per share growth suggests Nagase Brothers has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Nagase Brothers has lifted its dividend by approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has Nagase Brothers got what it takes to maintain its dividend payments? While earnings per share growth has been modest, Nagase Brothers's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Nagase Brothers and you should be aware of this before buying any shares.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.