Why It Might Not Make Sense To Buy Nissan Securities Group Co., Ltd. (TSE:8705) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nissan Securities Group Co., Ltd. (TSE:8705) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Nissan Securities Group's shares before the 29th of September to receive the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be JP¥3.00 per share, on the back of last year when the company paid a total of JP¥15.00 to shareholders. Looking at the last 12 months of distributions, Nissan Securities Group has a trailing yield of approximately 6.6% on its current stock price of JP¥226.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 87% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for Nissan Securities Group
Click here to see how much of its profit Nissan Securities Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Nissan Securities Group's earnings per share have dropped 11% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Nissan Securities Group has increased its dividend at approximately 14% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Nissan Securities Group is already paying out 87% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
To Sum It Up
Has Nissan Securities Group got what it takes to maintain its dividend payments? We're not overly enthused to see Nissan Securities Group's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Nissan Securities Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that being said, if you're still considering Nissan Securities Group as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Nissan Securities Group is showing 3 warning signs in our investment analysis, and 1 of those is significant...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.