Nitto Fuji Flour Milling Co.,Ltd. (TSE:2003) Passed Our Checks, And It's About To Pay A JP¥140.00 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 Nitto Fuji Flour Milling Co.,Ltd. (TSE:2003) 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. Accordingly, Nitto Fuji Flour MillingLtd investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥140.00 per share. Last year, in total, the company distributed JP¥280 to shareholders. Based on the last year's worth of payments, Nitto Fuji Flour MillingLtd has a trailing yield of 4.0% on the current stock price of JP¥7010.00. If you buy this business for its dividend, you should have an idea of whether Nitto Fuji Flour MillingLtd's dividend is reliable and sustainable. As a result, readers should always check whether Nitto Fuji Flour MillingLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Nitto Fuji Flour MillingLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Nitto Fuji Flour MillingLtd's payout ratio is modest, at just 36% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 49% of its free cash flow in the past year.

It's positive to see that Nitto Fuji Flour MillingLtd'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 Nitto Fuji Flour MillingLtd 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. With that in mind, we're encouraged by the steady growth at Nitto Fuji Flour MillingLtd, with earnings per share up 7.3% 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nitto Fuji Flour MillingLtd has delivered an average of 23% per year annual increase in its dividend, based on the past 10 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.

The Bottom Line

Should investors buy Nitto Fuji Flour MillingLtd for the upcoming dividend? Earnings per share growth has been growing somewhat, and Nitto Fuji Flour MillingLtd 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. 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 Nitto Fuji Flour MillingLtd is halfway there. Nitto Fuji Flour MillingLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Nitto Fuji Flour MillingLtd has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Nitto Fuji Flour MillingLtd that you should be aware of before investing in their shares.

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.