PRAP Japan, Inc. (TSE:2449) Passed Our Checks, And It's About To Pay A JP¥41.00 Dividend
PRAP Japan, Inc. (TSE:2449) stock is about to trade ex-dividend in four 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. 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. In other words, investors can purchase PRAP Japan's shares before the 28th of August in order to be eligible for the dividend, which will be paid on the 30th of November.
The company's upcoming dividend is JP¥41.00 a share, following on from the last 12 months, when the company distributed a total of JP¥41.00 per share to shareholders. Based on the last year's worth of payments, PRAP Japan stock has a trailing yield of around 3.8% on the current share price of JP¥1092.00. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see PRAP Japan paying out a modest 37% of its earnings. 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. It distributed 27% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for PRAP Japan
Click here to see how much of its profit PRAP Japan 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. It's encouraging to see PRAP Japan has grown its earnings rapidly, up 21% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, PRAP Japan has increased its dividend at approximately 2.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because PRAP Japan is keeping back more of its profits to grow the business.
To Sum It Up
Has PRAP Japan got what it takes to maintain its dividend payments? PRAP Japan has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. PRAP Japan looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in PRAP Japan for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for PRAP Japan that we recommend you consider before investing in the business.
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.