Primo Global Holdings Co., Ltd. (TSE:367A) Passed Our Checks, And It's About To Pay A JP¥60.00 Dividend
Readers hoping to buy Primo Global Holdings Co., Ltd. (TSE:367A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Primo Global Holdings investors that purchase the stock on or after the 28th of August will not receive the dividend, which will be paid on the 30th of November.
The company's next dividend payment will be JP¥60.00 per share, on the back of last year when the company paid a total of JP¥120 to shareholders. Based on the last year's worth of payments, Primo Global Holdings stock has a trailing yield of around 4.3% on the current share price of JP¥2781.00. If you buy this business for its dividend, you should have an idea of whether Primo Global Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Primo Global Holdings has been able to grow its dividends, or if the dividend might be cut.
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. It paid out 76% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Primo Global Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Primo Global Holdings'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 Primo Global Holdings
Click here to see how much of its profit Primo Global Holdings 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Primo Global Holdings's earnings per share have been growing at 17% a year for the past three years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.
Given that Primo Global Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
Final Takeaway
Has Primo Global Holdings got what it takes to maintain its dividend payments? We like Primo Global Holdings'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. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Primo Global Holdings is facing. For example, we've found 1 warning sign for Primo Global Holdings that we recommend you consider before investing in the business.
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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.