Nissan Chemical Corporation (TSE:4021) Looks Interesting, And It's About To Pay A Dividend
Nissan Chemical Corporation (TSE:4021) stock is about to trade ex-dividend in four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Nissan Chemical's shares before the 29th of September to receive the dividend, which will be paid on the 8th of December.
The company's next dividend payment will be JP¥70.00 per share, and in the last 12 months, the company paid a total of JP¥212 per share. Based on the last year's worth of payments, Nissan Chemical has a trailing yield of 2.6% on the current stock price of JP¥8291.00. If you buy this business for its dividend, you should have an idea of whether Nissan Chemical's dividend is reliable and sustainable. So we need to investigate whether Nissan Chemical can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Nissan Chemical paid out 52% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year it paid out 55% of its free cash flow as dividends, within the usual range for most companies.
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.
View our latest analysis for Nissan Chemical
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Nissan Chemical's earnings per share have risen 11% per annum over the last five years. Nissan Chemical has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nissan Chemical has delivered 18% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid Nissan Chemical? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Nissan Chemical's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 52% and 55% respectively. All things considered, we are not particularly enthused about Nissan Chemical from a dividend perspective.
Ever wonder what the future holds for Nissan Chemical? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.