Should You Buy WILL,Co.,Ltd. (TSE:3241) For Its Upcoming Dividend?

Readers hoping to buy WILL,Co.,Ltd. (TSE:3241) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Thus, you can purchase WILLCo.Ltd's shares before the 29th of December in order to receive the dividend, which the company will pay on the 31st of March.

The company's upcoming dividend is JP¥19.50 a share, following on from the last 12 months, when the company distributed a total of JP¥19.50 per share to shareholders. Last year's total dividend payments show that WILLCo.Ltd has a trailing yield of 3.3% on the current share price of JP¥589.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether WILLCo.Ltd can afford its dividend, and if the dividend could grow.

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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. WILLCo.Ltd has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether WILLCo.Ltd generated enough free cash flow to afford its dividend. Dividends consumed 75% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

See our latest analysis for WILLCo.Ltd

Click here to see how much of its profit WILLCo.Ltd 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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, WILLCo.Ltd's earnings per share have been growing at 15% a year for the past five years. WILLCo.Ltd 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. WILLCo.Ltd has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has WILLCo.Ltd got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, WILLCo.Ltd paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about WILLCo.Ltd, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks WILLCo.Ltd is facing. To that end, you should learn about the 2 warning signs we've spotted with WILLCo.Ltd (including 1 which doesn't sit too well with us).

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.