Why You Might Be Interested In HKS Co., Ltd. (TSE:7219) For Its Upcoming Dividend
Readers hoping to buy HKS Co., Ltd. (TSE:7219) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase HKS' 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 next dividend payment will be JP¥65.00 per share, and in the last 12 months, the company paid a total of JP¥65.00 per share. Looking at the last 12 months of distributions, HKS has a trailing yield of approximately 2.4% on its current stock price of JP¥2667.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. HKS is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 paid out more than half (68%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that HKS'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 HKS
Click here to see how much of its profit HKS 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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see HKS has grown its earnings rapidly, up 27% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. HKS has delivered an average of 8.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is HKS an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, HKS paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in HKS for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for HKS (1 makes us a bit uncomfortable) you should be aware of.
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.