Three Days Left Until Nagase Brothers Inc. (TSE:9733) Trades Ex-Dividend

Nagase Brothers Inc. (TSE:9733) stock is about to trade ex-dividend in three 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. In other words, investors can purchase Nagase Brothers' shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 30th of June.

The company's next dividend payment will be JP¥100.00 per share, and in the last 12 months, the company paid a total of JP¥100.00 per share. Based on the last year's worth of payments, Nagase Brothers stock has a trailing yield of around 5.3% on the current share price of JP¥1901.00. If you buy this business for its dividend, you should have an idea of whether Nagase Brothers's dividend is reliable and sustainable. As a result, readers should always check whether Nagase Brothers has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Nagase Brothers paid out 125% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. It paid out more than half (64%) of its free cash flow in the past year, which is within an average range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Nagase Brothers fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Check out our latest analysis for Nagase Brothers

Click here to see how much of its profit Nagase Brothers 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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Nagase Brothers's earnings per share have been growing at 16% a year 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. Since the start of our data, 10 years ago, Nagase Brothers has lifted its dividend by approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Nagase Brothers? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. Overall, it's hard to get excited about Nagase Brothers from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Nagase Brothers, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Nagase Brothers you should know about.

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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.