Here's What We Like About Kikusui Chemical Industries' (TSE:7953) 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 Kikusui Chemical Industries Co., Ltd. (TSE:7953) is about to go ex-dividend in just 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Kikusui Chemical Industries' shares before the 29th of September to receive the dividend, which will be paid on the 8th of December.
The company's next dividend payment will be JP¥7.00 per share, on the back of last year when the company paid a total of JP¥17.00 to shareholders. Looking at the last 12 months of distributions, Kikusui Chemical Industries has a trailing yield of approximately 4.2% on its current stock price of JP¥405.00. 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.
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. Kikusui Chemical Industries paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. 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. It distributed 40% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Kikusui Chemical Industries'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 Kikusui Chemical Industries
Click here to see how much of its profit Kikusui Chemical Industries 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Kikusui Chemical Industries's earnings per share have been growing at 19% a year for the past five years. Kikusui Chemical Industries has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Kikusui Chemical Industries has increased its dividend at approximately 0.6% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Is Kikusui Chemical Industries an attractive dividend stock, or better left on the shelf? Kikusui Chemical Industries's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Kikusui Chemical Industries has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Kikusui Chemical Industries and you should be aware of it before buying any shares.
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.
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.