Is It Worth Considering Enomoto Co., Ltd. (TSE:6928) For Its Upcoming Dividend?

Enomoto Co., Ltd. (TSE:6928) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Enomoto's shares on or after the 29th of September will not receive the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be JP¥40.00 per share, on the back of last year when the company paid a total of JP¥75.00 to shareholders. Calculating the last year's worth of payments shows that Enomoto has a trailing yield of 2.7% on the current share price of JP¥2950.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Enomoto has been able to grow its dividends, or if the dividend might be cut.

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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. Enomoto paid out a comfortable 33% of its profit last year. A useful secondary check can be to evaluate whether Enomoto generated enough free cash flow to afford its dividend. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Enomoto'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 Enomoto

Click here to see how much of its profit Enomoto 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 earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Enomoto's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Enomoto has lifted its dividend by approximately 18% a year on average.

To Sum It Up

Has Enomoto got what it takes to maintain its dividend payments? Earnings per share have been flat over the 10-year timeframe we consider, and Enomoto paid out less than half its earnings and more than half its free cashflow over the last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Enomoto for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Enomoto that we strongly recommend you have a look at before investing in the company.

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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.