Be Sure To Check Out Nihon Denkei Co.,Ltd. (TSE:9908) Before It Goes Ex-Dividend

Readers hoping to buy Nihon Denkei Co.,Ltd. (TSE:9908) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Nihon DenkeiLtd's shares before the 27th of September in order to receive the dividend, which the company will pay on the 11th of December.

The company's next dividend payment will be JP¥40.00 per share, on the back of last year when the company paid a total of JP¥82.00 to shareholders. Last year's total dividend payments show that Nihon DenkeiLtd has a trailing yield of 4.6% on the current share price of JP¥1785.00. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Nihon DenkeiLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Nihon DenkeiLtd paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether Nihon DenkeiLtd generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Nihon DenkeiLtd'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 Nihon DenkeiLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Nihon DenkeiLtd earnings per share are up 4.3% per annum over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nihon DenkeiLtd has delivered 13% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Nihon DenkeiLtd worth buying for its dividend? Earnings per share have been growing moderately, and Nihon DenkeiLtd 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. It might be nice to see earnings growing faster, but Nihon DenkeiLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

Want to learn more about Nihon DenkeiLtd's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.