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 Nippon Carbide Industries Co., Inc. (TSE:4064) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is two business days 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 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. Thus, you can purchase Nippon Carbide Industries' shares before the 29th of September in order to receive the dividend, which the company will pay on the 8th of December.
The company's next dividend payment will be JP¥67.00 per share, on the back of last year when the company paid a total of JP¥134 to shareholders. Based on the last year's worth of payments, Nippon Carbide Industries has a trailing yield of 3.7% on the current stock price of JP¥3630.00. 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! As a result, readers should always check whether Nippon Carbide Industries has been able to grow its dividends, or if the dividend might be cut.
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 Nippon Carbide Industries's payout ratio is modest, at just 33% of profit. 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. It paid out 16% of its free cash flow as dividends last year, which is conservatively low.
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.
Check out our latest analysis for Nippon Carbide Industries
Click here to see how much of its profit Nippon Carbide Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Nippon Carbide Industries's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nippon Carbide Industries has delivered 21% dividend growth per year on average over the past 10 years.
The Bottom Line
Is Nippon Carbide Industries an attractive dividend stock, or better left on the shelf? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. 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 Carbide Industries's dividend merits.
In light of that, while Nippon Carbide Industries has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Nippon Carbide Industries that we recommend you consider before investing in the business.
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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.