Is It Smart To Buy Career Design Center Co., Ltd. (TSE:2410) Before It Goes Ex-Dividend?

Career Design Center Co., Ltd. (TSE:2410) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Thus, you can purchase Career Design Center's shares before the 29th of September in order to receive the dividend, which the company will pay on the 22nd of December.

The company's upcoming dividend is JP¥160.00 a share, following on from the last 12 months, when the company distributed a total of JP¥160 per share to shareholders. Calculating the last year's worth of payments shows that Career Design Center has a trailing yield of 5.6% on the current share price of JP¥2860.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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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. That's why it's good to see Career Design Center paying out a modest 45% 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. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Career Design Center'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 Career Design Center

Click here to see how much of its profit Career Design Center 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why we're glad to see earnings per share up 9.4% over the past 12 months. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Career Design Center has increased its dividend at approximately 18% a year on average. 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 Career Design Center an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Career Design Center 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 Career Design Center is halfway there. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Career Design Center for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Career Design Center that we recommend you consider before investing in the business.

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.