Is It Smart To Buy Weathernews Inc. (TSE:4825) Before It Goes Ex-Dividend?
Weathernews Inc. (TSE:4825) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Weathernews' shares before the 28th of May in order to be eligible for the dividend, which will be paid on the 18th of August.
The company's next dividend payment will be JP¥62.50 per share, on the back of last year when the company paid a total of JP¥45.00 to shareholders. Calculating the last year's worth of payments shows that Weathernews has a trailing yield of 2.1% on the current share price of JP¥2164.00. If you buy this business for its dividend, you should have an idea of whether Weathernews's dividend is reliable and sustainable. So we need to investigate whether Weathernews can afford its dividend, and if the dividend could grow.
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. Weathernews paid out 53% of its earnings to investors last year, a normal payout level for most businesses. 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 36% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Weathernews'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.
View our latest analysis for Weathernews
Click here to see how much of its profit Weathernews 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Weathernews's earnings per share have been growing at 18% a year for the past five years. Weathernews is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some 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. Weathernews has delivered an average of 9.9% 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
Has Weathernews got what it takes to maintain its dividend payments? We like Weathernews's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Weathernews looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Want to learn more about Weathernews's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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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.