Here's What We Like About Nippon Life India Asset Management's (NSE:NAM-INDIA) Upcoming Dividend

It looks like Nippon Life India Asset Management Limited (NSE:NAM-INDIA) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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, Nippon Life India Asset Management investors that purchase the stock on or after the 4th of July will not receive the dividend, which will be paid on the 17th of August.

The company's upcoming dividend is ₹10.00 a share, following on from the last 12 months, when the company distributed a total of ₹18.00 per share to shareholders. Based on the last year's worth of payments, Nippon Life India Asset Management has a trailing yield of 2.3% on the current stock price of ₹783.75. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. Its dividend payout ratio is 89% 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. It could become a concern if earnings started to decline.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

See our latest analysis for Nippon Life India Asset Management

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Nippon Life India Asset Management's earnings have been skyrocketing, up 24% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, Nippon Life India Asset Management has lifted its dividend by approximately 20% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has Nippon Life India Asset Management got what it takes to maintain its dividend payments? Earnings per share are growing at an attractive rate, and Nippon Life India Asset Management is paying out a bit over half its profits. In summary, Nippon Life India Asset Management appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Nippon Life India Asset Management has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Nippon Life India Asset Management is showing 2 warning signs in our investment analysis, and 1 of those is significant...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.