Why You Might Be Interested In CSS Holdings,Ltd. (TSE:2304) For Its Upcoming Dividend
It looks like CSS Holdings,Ltd. (TSE:2304) is about to go ex-dividend in the next three 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase CSS HoldingsLtd's shares before the 29th of September in order to receive the dividend, which the company will pay on the 22nd of December.
The company's next dividend payment will be JP¥20.00 per share, on the back of last year when the company paid a total of JP¥35.00 to shareholders. Calculating the last year's worth of payments shows that CSS HoldingsLtd has a trailing yield of 3.8% on the current share price of JP¥913.00. If you buy this business for its dividend, you should have an idea of whether CSS HoldingsLtd's dividend is reliable and sustainable. As a result, readers should always check whether CSS HoldingsLtd has been able to grow its dividends, or if the dividend might be cut.
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. CSS HoldingsLtd has a low and conservative payout ratio of just 16% of its income after tax. 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. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that CSS 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.
Check out our latest analysis for CSS HoldingsLtd
Click here to see how much of its profit CSS HoldingsLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see CSS HoldingsLtd's earnings have been skyrocketing, up 94% per annum for the past five years. CSS HoldingsLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CSS HoldingsLtd has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Should investors buy CSS HoldingsLtd for the upcoming dividend? It's great that CSS HoldingsLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about CSS HoldingsLtd, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for CSS HoldingsLtd and you should be aware of them before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.