Interested In BIKE O's (TSE:3377) Upcoming JP¥5.50 Dividend? You Have Three Days Left
Readers hoping to buy BIKE O & COMPANY Ltd. (TSE:3377) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase BIKE O's shares before the 28th of May in order to receive the dividend, which the company will pay on the 3rd of August.
The company's upcoming dividend is JP¥5.50 a share, following on from the last 12 months, when the company distributed a total of JP¥11.00 per share to shareholders. Calculating the last year's worth of payments shows that BIKE O has a trailing yield of 2.8% on the current share price of JP¥386.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether BIKE O has been able to grow its dividends, or if the dividend might be cut.
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. BIKE O paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. 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. BIKE O paid out more free cash flow than it generated - 157%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
BIKE O does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
While BIKE O's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were BIKE O to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
View our latest analysis for BIKE O
Click here to see how much of its profit BIKE O paid out over the last 12 months.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, it's good to see earnings have grown 8.9% on last year. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. BIKE O's dividend payments are broadly unchanged compared to where they were two years ago.
Final Takeaway
Is BIKE O an attractive dividend stock, or better left on the shelf? Earnings per share have grown somewhat, although BIKE O paid out over half its profits and the dividend was not well covered by free cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of BIKE O.
Although, if you're still interested in BIKE O and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for BIKE O that you should be aware of before investing in their shares.
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.