Is It Smart To Buy Dijet Industrial Co., Ltd. (TSE:6138) Before It Goes Ex-Dividend?
Dijet Industrial Co., Ltd. (TSE:6138) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Dijet Industrial investors that purchase the stock on or after the 30th of March will not receive the dividend, which will be paid on the 29th of June.
The company's next dividend payment will be JP¥40.00 per share, on the back of last year when the company paid a total of JP¥40.00 to shareholders. Looking at the last 12 months of distributions, Dijet Industrial has a trailing yield of approximately 3.6% on its current stock price of JP¥1096.00. If you buy this business for its dividend, you should have an idea of whether Dijet Industrial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Dijet Industrial is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.
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 Dijet Industrial
Click here to see how much of its profit Dijet Industrial 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Dijet Industrial has grown its earnings rapidly, up 31% a year for the past five years. Dijet Industrial looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Dijet Industrial has increased its dividend at approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Dijet Industrial is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy Dijet Industrial for the upcoming dividend? It's great that Dijet Industrial is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Dijet Industrial looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Dijet Industrial is facing. Case in point: We've spotted 3 warning signs for Dijet Industrial you should be aware of.
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.