Daiichikosho Co., Ltd. (TSE:7458) Goes Ex-Dividend Soon
Daiichikosho Co., Ltd. (TSE:7458) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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, Daiichikosho investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 7th of December.
The company's next dividend payment will be JP¥34.00 per share, on the back of last year when the company paid a total of JP¥57.00 to shareholders. Calculating the last year's worth of payments shows that Daiichikosho has a trailing yield of 3.6% on the current share price of JP¥1882.50. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Daiichikosho can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Daiichikosho paid out a comfortable 38% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the past year it paid out 129% of its free cash flow as dividends, which is uncomfortably 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.
Daiichikosho paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Daiichikosho's ability to maintain its dividend.
View our latest analysis for Daiichikosho
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Daiichikosho has grown its earnings rapidly, up 41% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Daiichikosho has delivered an average of 2.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Daiichikosho is keeping back more of its profits to grow the business.
Final Takeaway
Is Daiichikosho worth buying for its dividend? We like that Daiichikosho has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, it's hard to get excited about Daiichikosho from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 3 warning signs for Daiichikosho that we strongly recommend you have a look at before investing in the company.
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.