Why You Might Be Interested In Suzuki Motor Corporation (TSE:7269) For Its Upcoming Dividend
Readers hoping to buy Suzuki Motor Corporation (TSE:7269) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Suzuki Motor's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 30th of November.
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¥51.00 per share to shareholders. Looking at the last 12 months of distributions, Suzuki Motor has a trailing yield of approximately 2.6% on its current stock price of JP¥1989.50. If you buy this business for its dividend, you should have an idea of whether Suzuki Motor's dividend is reliable and sustainable. So we need to investigate whether Suzuki Motor 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. Suzuki Motor has a low and conservative payout ratio of just 17% 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. Fortunately, it paid out only 32% 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 Suzuki Motor
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Suzuki Motor's earnings have been skyrocketing, up 29% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Suzuki Motor has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Suzuki Motor worth buying for its dividend? We love that Suzuki Motor is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Suzuki Motor, and we would prioritise taking a closer look at it.
Ever wonder what the future holds for Suzuki Motor? See what the 18 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.