Here's What We Like About Dai-Ichi Cutter Kogyo k.k's (TSE:1716) Upcoming Dividend

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 Dai-Ichi Cutter Kogyo k.k. (TSE:1716) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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 Dai-Ichi Cutter Kogyo k.k's shares before the 27th of June in order to receive the dividend, which the company will pay on the 30th of September.

The company's next dividend payment will be JP¥35.00 per share, and in the last 12 months, the company paid a total of JP¥35.00 per share. Based on the last year's worth of payments, Dai-Ichi Cutter Kogyo k.k has a trailing yield of 2.2% on the current stock price of JP¥1603.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Dai-Ichi Cutter Kogyo k.k

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. Dai-Ichi Cutter Kogyo k.k is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 22% of its free cash flow last year.

It's positive to see that Dai-Ichi Cutter Kogyo k.k'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 Dai-Ichi Cutter Kogyo k.k paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Dai-Ichi Cutter Kogyo k.k earnings per share are up 4.0% per annum over the last five years. Dai-Ichi Cutter Kogyo k.k is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Dai-Ichi Cutter Kogyo k.k has lifted its dividend by approximately 30% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Dai-Ichi Cutter Kogyo k.k an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Dai-Ichi Cutter Kogyo k.k 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 Dai-Ichi Cutter Kogyo k.k is halfway there. Dai-Ichi Cutter Kogyo k.k looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about Dai-Ichi Cutter Kogyo k.k? Here's a visualisation of its historical rate of revenue and earnings growth.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com