Ad-Sol Nissin Corporation (TSE:3837) Passed Our Checks, And It's About To Pay A JP¥25.00 Dividend

Readers hoping to buy Ad-Sol Nissin Corporation (TSE:3837) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Ad-Sol Nissin's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥25.00 per share, on the back of last year when the company paid a total of JP¥50.00 to shareholders. Based on the last year's worth of payments, Ad-Sol Nissin has a trailing yield of 2.8% on the current stock price of JP¥1758.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Ad-Sol Nissin has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Ad-Sol Nissin

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. That's why it's good to see Ad-Sol Nissin paying out a modest 38% of its earnings. 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 47% of its free cash flow in the past 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 Ad-Sol Nissin paid out over the last 12 months.

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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Ad-Sol Nissin earnings per share are up 3.4% per annum over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, four years ago, Ad-Sol Nissin has lifted its dividend by approximately 11% a year on average. 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

Should investors buy Ad-Sol Nissin for the upcoming dividend? Earnings per share growth has been growing somewhat, and Ad-Sol Nissin 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 Ad-Sol Nissin is halfway there. There's a lot to like about Ad-Sol Nissin, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Ad-Sol Nissin is facing. In terms of investment risks, we've identified 1 warning sign with Ad-Sol Nissin and understanding them should be part of your investment process.

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.