Why You Might Be Interested In GMO Pepabo, Inc. (TSE:3633) For Its Upcoming Dividend

GMO Pepabo, Inc. (TSE:3633) is about to trade ex-dividend in the next 3 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase GMO Pepabo's shares before the 29th of December to receive the dividend, which will be paid on the 23rd of March.

The company's upcoming dividend is JP¥105.00 a share, following on from the last 12 months, when the company distributed a total of JP¥67.00 per share to shareholders. Based on the last year's worth of payments, GMO Pepabo stock has a trailing yield of around 2.6% on the current share price of JP¥2624.00. 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 typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately GMO Pepabo's payout ratio is modest, at just 37% of profit.

See our latest analysis for GMO Pepabo

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

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. This is why it's a relief to see GMO Pepabo earnings per share are up 8.1% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. GMO Pepabo has delivered an average of 7.1% per year annual increase in its dividend, based on the past 10 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid GMO Pepabo? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating GMO Pepabo more closely.

While it's tempting to invest in GMO Pepabo for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with GMO Pepabo (at least 1 which is concerning), and understanding them should be part of your investment process.

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.