Is It Smart To Buy Bando Chemical Industries, Ltd. (TSE:5195) Before It Goes Ex-Dividend?
Bando Chemical Industries, Ltd. (TSE:5195) stock is about to trade ex-dividend in two days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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 Bando Chemical Industries' shares before the 29th of September to receive the dividend, which will be paid on the 1st of December.
The company's upcoming dividend is JP¥50.00 a share, following on from the last 12 months, when the company distributed a total of JP¥100.00 per share to shareholders. Based on the last year's worth of payments, Bando Chemical Industries stock has a trailing yield of around 4.0% on the current share price of JP¥2527.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Bando Chemical Industries can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bando Chemical Industries paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Bando Chemical Industries generated enough free cash flow to afford its dividend. Over the last year it paid out 60% of its free cash flow as dividends, within the usual range 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 Bando Chemical Industries
Click here to see how much of its profit Bando Chemical Industries paid out over the last 12 months.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Bando Chemical Industries has grown its earnings rapidly, up 25% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bando Chemical Industries has delivered 15% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Should investors buy Bando Chemical Industries for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Bando Chemical Industries paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Bando Chemical Industries for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Bando Chemical Industries that you should be aware of before investing in their 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.