Here's What We Like About Nippon Yakin Kogyo's (TSE:5480) Upcoming Dividend
Nippon Yakin Kogyo Co., Ltd. (TSE:5480) is about to trade ex-dividend in the next three 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Nippon Yakin Kogyo's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 1st of December.
The company's upcoming dividend is JP¥110.00 a share, following on from the last 12 months, when the company distributed a total of JP¥220 per share to shareholders. Looking at the last 12 months of distributions, Nippon Yakin Kogyo has a trailing yield of approximately 4.0% on its current stock price of JP¥5500.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's 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. Fortunately Nippon Yakin Kogyo's payout ratio is modest, at just 38% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (66%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Nippon Yakin Kogyo'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 Nippon Yakin Kogyo
Click here to see how much of its profit Nippon Yakin Kogyo 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. Fortunately for readers, Nippon Yakin Kogyo's earnings per share have been growing at 18% a year for the past five years. Nippon Yakin Kogyo is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
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, Nippon Yakin Kogyo has lifted its dividend by approximately 31% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
From a dividend perspective, should investors buy or avoid Nippon Yakin Kogyo? Earnings per share have grown at a nice rate in recent times and over the last year, Nippon Yakin Kogyo paid out less than half its earnings and a bit over half its free cash flow. Nippon Yakin Kogyo looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Nippon Yakin Kogyo for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Nippon Yakin Kogyo (including 1 which shouldn't be ignored).
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.