F.C.C. Co., Ltd. (TSE:7296) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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 F.C.C. Co., Ltd. (TSE:7296) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Thus, you can purchase F.C.C's shares before the 27th of September in order to receive the dividend, which the company will pay on the 27th of November.

The company's upcoming dividend is JP¥38.00 a share, following on from the last 12 months, when the company distributed a total of JP¥76.00 per share to shareholders. Based on the last year's worth of payments, F.C.C stock has a trailing yield of around 3.1% on the current share price of JP¥2424.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether F.C.C has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for F.C.C

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. That's why it's good to see F.C.C paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether F.C.C generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

It's positive to see that F.C.C'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.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at F.C.C, with earnings per share up 3.6% on average over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, F.C.C has lifted its dividend by approximately 6.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is F.C.C worth buying for its dividend? Earnings per share have been growing moderately, and F.C.C is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and F.C.C is halfway there. F.C.C looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in F.C.C for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for F.C.C and you should be aware of it before buying any 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.