Be Sure To Check Out NS Tool Co., Ltd. (TSE:6157) Before It Goes Ex-Dividend
It looks like NS Tool Co., Ltd. (TSE:6157) is about to go ex-dividend in the next two 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. 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. In other words, investors can purchase NS Tool's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be JP¥15.00 per share. Last year, in total, the company distributed JP¥30.00 to shareholders. Calculating the last year's worth of payments shows that NS Tool has a trailing yield of 3.7% on the current share price of JP¥820.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. NS Tool paid out a comfortable 43% of its profit last year. A useful secondary check can be to evaluate whether NS Tool generated enough free cash flow to afford its dividend. It distributed 45% of its free cash flow as dividends, a comfortable payout level 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 NS Tool
Click here to see how much of its profit NS Tool paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at NS Tool, with earnings per share up 8.3% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NS Tool has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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 NS Tool worth buying for its dividend? Earnings per share growth has been growing somewhat, and NS Tool is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and NS Tool is halfway there. Overall we think this is an attractive combination and worthy of further research.
So while NS Tool looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that NS Tool is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious...
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.