There's A Lot To Like About Nippon Fine Chemical's (TSE:4362) Upcoming JP¥52.00 Dividend

Readers hoping to buy Nippon Fine Chemical Co., Ltd. (TSE:4362) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Nippon Fine Chemical's shares before the 29th of September to receive the dividend, which will be paid on the 1st of December.

The company's upcoming dividend is JP¥52.00 a share, following on from the last 12 months, when the company distributed a total of JP¥104 per share to shareholders. Based on the last year's worth of payments, Nippon Fine Chemical has a trailing yield of 3.9% on the current stock price of JP¥2689.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Nippon Fine Chemical can afford its dividend, and if the dividend could grow.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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 Nippon Fine Chemical paying out a modest 46% of its earnings. 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. Fortunately, it paid out only 47% of its free cash flow in the past year.

It's positive to see that Nippon Fine Chemical'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.

Check out our latest analysis for Nippon Fine Chemical

Click here to see how much of its profit Nippon Fine Chemical 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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Nippon Fine Chemical's earnings per share have risen 13% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nippon Fine Chemical has delivered 16% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Nippon Fine Chemical worth buying for its dividend? Nippon Fine Chemical has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Curious about whether Nippon Fine Chemical has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.