MITSUI-SOKO HOLDINGS (TSE:9302) Could Be A Buy For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that MITSUI-SOKO HOLDINGS Co., Ltd. (TSE:9302) is about to go ex-dividend in just 3 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 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 MITSUI-SOKO HOLDINGS' shares before the 29th of September in order to receive the dividend, which the company will pay on the 2nd of December.
The company's next dividend payment will be JP¥25.00 per share, on the back of last year when the company paid a total of JP¥50.00 to shareholders. Calculating the last year's worth of payments shows that MITSUI-SOKO HOLDINGS has a trailing yield of 1.5% on the current share price of JP¥3337.00. 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. MITSUI-SOKO HOLDINGS paid out a comfortable 32% of its profit last year. A useful secondary check can be to evaluate whether MITSUI-SOKO HOLDINGS generated enough free cash flow to afford its dividend. It distributed 32% 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.
See our latest analysis for MITSUI-SOKO HOLDINGS
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about MITSUI-SOKO HOLDINGS's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. MITSUI-SOKO HOLDINGS has delivered 12% dividend growth per year on average over the past 10 years.
Final Takeaway
Has MITSUI-SOKO HOLDINGS got what it takes to maintain its dividend payments? Earnings per share have been flat over this time, but we're intrigued to see that MITSUI-SOKO HOLDINGS is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. Generally we like to see both low payout ratios and strong earnings per share growth, but MITSUI-SOKO HOLDINGS is halfway there. It's a promising combination that should mark this company worthy of closer attention.
Wondering what the future holds for MITSUI-SOKO HOLDINGS? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.