Here's What We Like About NARUMIYA INTERNATIONAL's (TSE:9275) Upcoming Dividend

NARUMIYA INTERNATIONAL Co., Ltd. (TSE:9275) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase NARUMIYA INTERNATIONAL's shares before the 27th of February in order to receive the dividend, which the company will pay on the 27th of May.

The company's next dividend payment will be JP¥53.00 per share, on the back of last year when the company paid a total of JP¥53.00 to shareholders. Last year's total dividend payments show that NARUMIYA INTERNATIONAL has a trailing yield of 4.0% on the current share price of JP¥1318.00. If you buy this business for its dividend, you should have an idea of whether NARUMIYA INTERNATIONAL's dividend is reliable and sustainable. So we need to investigate whether NARUMIYA INTERNATIONAL can afford its dividend, and if the dividend could grow.

See our latest analysis for NARUMIYA INTERNATIONAL

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. NARUMIYA INTERNATIONAL paid out a comfortable 30% 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. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's positive to see that NARUMIYA INTERNATIONAL'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.

Click here to see how much of its profit NARUMIYA INTERNATIONAL paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see NARUMIYA INTERNATIONAL earnings per share are up 6.2% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NARUMIYA INTERNATIONAL has delivered an average of 9.4% per year annual increase in its dividend, based on the past six years of dividend payments. 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 NARUMIYA INTERNATIONAL? Earnings per share growth has been growing somewhat, and NARUMIYA INTERNATIONAL is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but NARUMIYA INTERNATIONAL is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about NARUMIYA INTERNATIONAL, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks NARUMIYA INTERNATIONAL is facing. Case in point: We've spotted 1 warning sign for NARUMIYA INTERNATIONAL you should be aware of.

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.