Should Income Investors Look At CANDEAL Co.,Ltd (TSE:1446) Before Its Ex-Dividend?

It looks like CANDEAL Co.,Ltd (TSE:1446) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase CANDEALLtd's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 25th of December.

The company's next dividend payment will be JP¥4.00 per share. Last year, in total, the company distributed JP¥8.00 to shareholders. Calculating the last year's worth of payments shows that CANDEALLtd has a trailing yield of 1.4% on the current share price of JP¥576.00. If you buy this business for its dividend, you should have an idea of whether CANDEALLtd's dividend is reliable and sustainable. So we need to investigate whether CANDEALLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for CANDEALLtd

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. CANDEALLtd is paying out an acceptable 59% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 13% of its free cash flow in the last year.

It's positive to see that CANDEALLtd'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 how much of its profit CANDEALLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that CANDEALLtd's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CANDEALLtd has delivered 5.9% dividend growth per year on average over the past five years.

To Sum It Up

Should investors buy CANDEALLtd for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with CANDEALLtd, you should know about the other risks facing this business. To that end, you should learn about the 3 warning signs we've spotted with CANDEALLtd (including 1 which is potentially serious).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.