Kansai Paint Co., Ltd. (TSE:4613) Pays A JP¥58.00 Dividend In Just Three Days

Readers hoping to buy Kansai Paint Co., Ltd. (TSE:4613) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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 Kansai Paint's shares before the 29th of September in order to receive the dividend, which the company will pay on the 1st of December.

The company's next dividend payment will be JP¥58.00 per share. Last year, in total, the company distributed JP¥110 to shareholders. Based on the last year's worth of payments, Kansai Paint stock has a trailing yield of around 4.1% on the current share price of JP¥2851.00. If you buy this business for its dividend, you should have an idea of whether Kansai Paint's dividend is reliable and sustainable. So we need to investigate whether Kansai Paint can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Kansai Paint paid out 65% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (71%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Kansai Paint'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.

See our latest analysis for Kansai Paint

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Kansai Paint's earnings per share have been growing at 17% a year for the past five years. Kansai Paint has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Kansai Paint has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Kansai Paint? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Kansai Paint's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 65% and 71% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Kansai Paint's dividend merits.

On that note, you'll want to research what risks Kansai Paint is facing. For example, we've found 1 warning sign for Kansai Paint 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.