Four Days Left Until Nippon Chemical Industrial Co., Ltd. (TSE:4092) Trades Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Nippon Chemical Industrial Co., Ltd. (TSE:4092) is about to go ex-dividend in just 4 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Nippon Chemical Industrial investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 7th of December.
The company's next dividend payment will be JP¥120.00 per share, and in the last 12 months, the company paid a total of JP¥120 per share. Calculating the last year's worth of payments shows that Nippon Chemical Industrial has a trailing yield of 4.2% on the current share price of JP¥5740.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Nippon Chemical Industrial has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nippon Chemical Industrial paid out a comfortable 40% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out dividends equivalent to 271% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Nippon Chemical Industrial intends to continue funding this dividend, or if it could be forced to cut the payment.
Nippon Chemical Industrial paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Nippon Chemical Industrial's ability to maintain its dividend.
Check out our latest analysis for Nippon Chemical Industrial
Click here to see how much of its profit Nippon Chemical Industrial 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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Nippon Chemical Industrial, with earnings per share up 3.8% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nippon Chemical Industrial has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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
Should investors buy Nippon Chemical Industrial for the upcoming dividend? Nippon Chemical Industrial has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it's hard to get excited about Nippon Chemical Industrial from a dividend perspective.
If you're not too concerned about Nippon Chemical Industrial's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For instance, we've identified 4 warning signs for Nippon Chemical Industrial (2 can't be ignored) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.