Here's What We Like About B&PLtd's (TSE:7804) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see B&P Co.,Ltd. (TSE:7804) is about to trade ex-dividend in the next 3 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 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 B&PLtd's shares on or after the 29th of October will not receive the dividend, which will be paid on the 28th of January.

The company's upcoming dividend is JP¥87.00 a share, following on from the last 12 months, when the company distributed a total of JP¥87.00 per share to shareholders. Based on the last year's worth of payments, B&PLtd stock has a trailing yield of around 3.4% on the current share price of JP¥2552.00. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. B&PLtd paid out a comfortable 38% of its profit last year. 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. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

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 B&PLtd

Click here to see how much of its profit B&PLtd 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, it's good to see earnings have grown 8.8% on last year. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. B&PLtd has delivered an average of 11% per year annual increase in its dividend, based on the past two 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.

To Sum It Up

Is B&PLtd an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and B&PLtd is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. 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 B&PLtd is halfway there. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while B&PLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for B&PLtd you should know about.

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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