Is It Smart To Buy JAC Recruitment Co., Ltd. (TSE:2124) Before It Goes Ex-Dividend?

Readers hoping to buy JAC Recruitment Co., Ltd. (TSE:2124) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase JAC Recruitment's shares on or after the 29th of December will not receive the dividend, which will be paid on the 30th of March.

The company's next dividend payment will be JP¥36.00 per share. Last year, in total, the company distributed JP¥36.00 to shareholders. Calculating the last year's worth of payments shows that JAC Recruitment has a trailing yield of 3.3% on the current share price of JP¥1081.00. If you buy this business for its dividend, you should have an idea of whether JAC Recruitment's dividend is reliable and sustainable. As a result, readers should always check whether JAC Recruitment 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. JAC Recruitment is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether JAC Recruitment generated enough free cash flow to afford its dividend. Fortunately, it paid out only 44% of its free cash flow in the past year.

It's positive to see that JAC Recruitment'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 JAC Recruitment

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

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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see JAC Recruitment's earnings per share have risen 13% per annum over the last five years. JAC Recruitment is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, JAC Recruitment has lifted its dividend by approximately 25% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy JAC Recruitment for the upcoming dividend? JAC Recruitment's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

Curious what other investors think of JAC Recruitment? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.