Should You Buy Nihon Yamamura Glass Co., Ltd. (TSE:5210) For Its Upcoming Dividend?

Nihon Yamamura Glass Co., Ltd. (TSE:5210) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, 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 two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Nihon Yamamura Glass investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be JP¥25.00 per share. Last year, in total, the company distributed JP¥55.00 to shareholders. Last year's total dividend payments show that Nihon Yamamura Glass has a trailing yield of 3.5% on the current share price of JP¥1556.00. If you buy this business for its dividend, you should have an idea of whether Nihon Yamamura Glass's dividend is reliable and sustainable. As a result, readers should always check whether Nihon Yamamura Glass has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Nihon Yamamura Glass

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. Nihon Yamamura Glass has a low and conservative payout ratio of just 4.2% of its income after tax. A useful secondary check can be to evaluate whether Nihon Yamamura Glass generated enough free cash flow to afford its dividend. The good news is it paid out just 0.06% of its free cash flow in the last year.

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 Nihon Yamamura Glass 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. It's encouraging to see Nihon Yamamura Glass has grown its earnings rapidly, up 138% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Nihon Yamamura Glass looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nihon Yamamura Glass has delivered an average of 1.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Nihon Yamamura Glass is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Nihon Yamamura Glass? It's great that Nihon Yamamura Glass is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Nihon Yamamura Glass looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Nihon Yamamura Glass for the dividends alone, you should always be mindful of the risks involved. For example - Nihon Yamamura Glass has 2 warning signs we think you should be aware of.

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.