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

Readers hoping to buy CANDEAL Co.,Ltd (TSE:1446) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase CANDEALLtd's shares before the 29th of September to receive the dividend, which will be paid on the 10th of December.

The company's next dividend payment will be JP¥8.00 per share, on the back of last year when the company paid a total of JP¥8.00 to shareholders. Based on the last year's worth of payments, CANDEALLtd stock has a trailing yield of around 1.5% on the current share price of JP¥549.00. 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.

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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. CANDEALLtd paid out a comfortable 36% of its profit last year. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its 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.

See our latest analysis for CANDEALLtd

Click here to see how much of its profit CANDEALLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see CANDEALLtd's earnings per share have dropped 15% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CANDEALLtd has delivered an average of 4.9% per year annual increase in its dividend, based on the past six years of dividend payments.

The Bottom Line

Should investors buy CANDEALLtd for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, CANDEALLtd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for CANDEALLtd that we recommend you consider before investing in the business.

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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.