SEIKOH GIKEN Co., Ltd. (TYO:6834) stock is about to trade ex-dividend in 2 days time. Investors can purchase shares before the 30th of March in order to be eligible for this dividend, which will be paid on the 24th of June.
SEIKOH GIKEN’s next dividend payment will be JP¥40.00 per share, on the back of last year when the company paid a total of JP¥40.00 to shareholders. Calculating the last year’s worth of payments shows that SEIKOH GIKEN has a trailing yield of 2.0% on the current share price of ¥1967. 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 SEIKOH GIKEN can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. SEIKOH GIKEN paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether SEIKOH GIKEN generated enough free cash flow to afford its dividend. Luckily it paid out just 18% of its free cash flow last 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.
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. That’s why it’s comforting to see SEIKOH GIKEN’s earnings have been skyrocketing, up 26% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, SEIKOH GIKEN looks like a promising growth company.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past ten years, SEIKOH GIKEN has increased its dividend at approximately 10% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has SEIKOH GIKEN got what it takes to maintain its dividend payments? It’s great that SEIKOH GIKEN is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we’ve discovered 2 warning signs for SEIKOH GIKEN that you should be aware of before investing in their shares.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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