Why You Might Be Interested In Nisshin Seifun Group Inc. (TSE:2002) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Nisshin Seifun Group Inc. (TSE:2002) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Nisshin Seifun Group's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 4th of December.

The company's next dividend payment will be JP¥25.00 per share, and in the last 12 months, the company paid a total of JP¥50.00 per share. Calculating the last year's worth of payments shows that Nisshin Seifun Group has a trailing yield of 2.7% on the current share price of JP¥1864.00. 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! As a result, readers should always check whether Nisshin Seifun Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Nisshin Seifun Group

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 Nisshin Seifun Group's payout ratio is modest, at just 40% 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. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

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 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. With that in mind, we're encouraged by the steady growth at Nisshin Seifun Group, with earnings per share up 8.7% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Nisshin Seifun Group has delivered 12% dividend growth per year on average over the past 10 years. 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.

To Sum It Up

Is Nisshin Seifun Group worth buying for its dividend? Earnings per share have been growing moderately, and Nisshin Seifun Group is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Nisshin Seifun Group is halfway there. Overall we think this is an attractive combination and worthy of further research.

Curious what other investors think of Nisshin Seifun Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.

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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.