There's A Lot To Like About Sanyo Electric RailwayLtd's (TSE:9052) Upcoming JP¥25.00 Dividend
It looks like Sanyo Electric Railway Co.,Ltd. (TSE:9052) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sanyo Electric RailwayLtd's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 7th of December.
The company's upcoming dividend is JP¥25.00 a share, following on from the last 12 months, when the company distributed a total of JP¥50.00 per share to shareholders. Based on the last year's worth of payments, Sanyo Electric RailwayLtd has a trailing yield of 2.5% on the current stock price of JP¥1998.00. If you buy this business for its dividend, you should have an idea of whether Sanyo Electric RailwayLtd's dividend is reliable and sustainable. As a result, readers should always check whether Sanyo Electric RailwayLtd has been able to grow its dividends, or if the dividend might be cut.
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 Sanyo Electric RailwayLtd paying out a modest 32% 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. Fortunately, it paid out only 41% of its free cash flow in the past year.
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.
View our latest analysis for Sanyo Electric RailwayLtd
Click here to see how much of its profit Sanyo Electric RailwayLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Sanyo Electric RailwayLtd's earnings have been skyrocketing, up 53% per annum for the past five years. Sanyo Electric RailwayLtd 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sanyo Electric RailwayLtd has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is Sanyo Electric RailwayLtd an attractive dividend stock, or better left on the shelf? Sanyo Electric RailwayLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks Sanyo Electric RailwayLtd is facing. For example, we've found 2 warning signs for Sanyo Electric RailwayLtd (1 is a bit concerning!) that deserve your attention before investing in the shares.
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.