Only One Day Left To Cash In On Vt HoldingsLtd's (TSE:7593) Dividend
Vt Holdings Co.,Ltd. (TSE:7593) stock is about to trade ex-dividend in couple of 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Vt HoldingsLtd's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 1st of December.
The company's next dividend payment will be JP¥12.00 per share, on the back of last year when the company paid a total of JP¥24.00 to shareholders. Looking at the last 12 months of distributions, Vt HoldingsLtd has a trailing yield of approximately 4.5% on its current stock price of JP¥529.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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. Vt HoldingsLtd paid out 50% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Vt HoldingsLtd generated enough free cash flow to afford its dividend. Luckily it paid out just 25% of its free cash flow last year.
It's positive to see that Vt HoldingsLtd'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.
See our latest analysis for Vt HoldingsLtd
Click here to see how much of its profit Vt HoldingsLtd 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. With that in mind, we're encouraged by the steady growth at Vt HoldingsLtd, with earnings per share up 3.4% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Vt HoldingsLtd has delivered 4.1% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is Vt HoldingsLtd worth buying for its dividend? While earnings per share growth has been modest, Vt HoldingsLtd's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
On that note, you'll want to research what risks Vt HoldingsLtd is facing. For example, we've found 2 warning signs for Vt HoldingsLtd (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.