Be Sure To Check Out Giken Ltd. (TSE:6289) Before It Goes Ex-Dividend
Giken Ltd. (TSE:6289) stock is about to trade ex-dividend in 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Giken's shares on or after the 28th of August, you won't be eligible to receive the dividend, when it is paid on the 30th of November.
The company's upcoming dividend is JP¥27.00 a share, following on from the last 12 months, when the company distributed a total of JP¥54.00 per share to shareholders. Based on the last year's worth of payments, Giken stock has a trailing yield of around 2.8% on the current share price of JP¥1950.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
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. Giken paid out 51% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 35% of its free cash flow in the past year.
It's positive to see that Giken'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 Giken
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Giken's earnings per share have risen 15% per annum over the last five years. Giken has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Giken has delivered 4.7% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
Should investors buy Giken for the upcoming dividend? We like Giken'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. Giken looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Giken for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Giken and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.