Nippon Light Metal Holdings Company, Ltd. (TSE:5703) Goes Ex-Dividend Soon

It looks like Nippon Light Metal Holdings Company, Ltd. (TSE:5703) is about to go ex-dividend in the next four 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 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, Nippon Light Metal Holdings Company investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥20.00 per share. Last year, in total, the company distributed JP¥70.00 to shareholders. Last year's total dividend payments show that Nippon Light Metal Holdings Company has a trailing yield of 4.4% on the current share price of JP¥1608.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Nippon Light Metal Holdings Company has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Nippon Light Metal Holdings Company

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nippon Light Metal Holdings Company paid out a comfortable 31% 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. The good news is it paid out just 8.8% of its free cash flow in the last year.

It's positive to see that Nippon Light Metal Holdings Company'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Nippon Light Metal Holdings Company's earnings per share have dropped 13% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nippon Light Metal Holdings Company has delivered 5.8% dividend growth per year on average over the past 10 years.

Final Takeaway

Is Nippon Light Metal Holdings Company an attractive dividend stock, or better left on the shelf? Nippon Light Metal Holdings Company has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Nippon Light Metal Holdings Company's dividend merits.

In light of that, while Nippon Light Metal Holdings Company has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Nippon Light Metal Holdings Company that you should be aware of before investing in their shares.

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.