Shimadaya Corporation (TSE:250A) Will Pay A JP¥27.00 Dividend In Two Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Shimadaya Corporation (TSE:250A) is about to go ex-dividend in just two days. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Shimadaya investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is JP¥27.00 a share, following on from the last 12 months, when the company distributed a total of JP¥54.00 per share to shareholders. Based on the last year's worth of payments, Shimadaya stock has a trailing yield of around 3.3% on the current share price of JP¥1616.00. 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! As a result, readers should always check whether Shimadaya has been able to grow its dividends, or if the dividend might be cut.

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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. Shimadaya paid out a comfortable 32% of its profit last year. 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 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

Check out our latest analysis for Shimadaya

Click here to see how much of its profit Shimadaya paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Shimadaya, with earnings per share up 7.2% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Shimadaya has delivered an average of 64% per year annual increase in its dividend, based on the past two years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Shimadaya an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a steady rate, and Shimadaya paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Want to learn more about Shimadaya? Here's a visualisation of its historical rate of revenue and earnings growth.

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