Just Three Days Till NICHIDEN Corporation (TSE:9902) Will Be Trading Ex-Dividend

NICHIDEN Corporation (TSE:9902) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase NICHIDEN's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 1st of January.

The company's upcoming dividend is JP¥30.00 a share, following on from the last 12 months, when the company distributed a total of JP¥65.00 per share to shareholders. Looking at the last 12 months of distributions, NICHIDEN has a trailing yield of approximately 2.0% on its current stock price of JP¥3315.00. If you buy this business for its dividend, you should have an idea of whether NICHIDEN's dividend is reliable and sustainable. So we need to investigate whether NICHIDEN can afford its dividend, and if the dividend could grow.

Check out our latest analysis for NICHIDEN

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. NICHIDEN paid out a comfortable 42% of its profit last year. 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. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit NICHIDEN 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at NICHIDEN, with earnings per share up 2.1% on average over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last nine years, NICHIDEN has lifted its dividend by approximately 11% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid NICHIDEN? Earnings per share have been growing at a steady rate, and NICHIDEN paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's hard to get excited about NICHIDEN from a dividend perspective.

In light of that, while NICHIDEN has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for NICHIDEN you should be aware of.

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.