Interested In Nippon Tungsten's (TSE:6998) Upcoming JP¥60.00 Dividend? You Have Three Days Left
Readers hoping to buy Nippon Tungsten Co., Ltd. (TSE:6998) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Nippon Tungsten's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 7th of December.
The company's next dividend payment will be JP¥60.00 per share, on the back of last year when the company paid a total of JP¥60.00 to shareholders. Last year's total dividend payments show that Nippon Tungsten has a trailing yield of 2.1% on the current share price of JP¥4260.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nippon Tungsten paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Nippon Tungsten generated enough free cash flow to afford its dividend. Nippon Tungsten paid out more free cash flow than it generated - 187%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Nippon Tungsten paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Nippon Tungsten to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
View our latest analysis for Nippon Tungsten
Click here to see how much of its profit Nippon Tungsten paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Nippon Tungsten's earnings are 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. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Nippon Tungsten has lifted its dividend by approximately 13% a year on average.
To Sum It Up
Is Nippon Tungsten worth buying for its dividend? Earnings per share have barely grown in this time, and although Nippon Tungsten is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
However if you're still interested in Nippon Tungsten as a potential investment, you should definitely consider some of the risks involved with Nippon Tungsten. Be aware that Nippon Tungsten is showing 3 warning signs in our investment analysis, and 1 of those is a bit unpleasant...
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.