Be Sure To Check Out Sumitomo Densetsu Co.,Ltd. (TSE:1949) Before It Goes Ex-Dividend

It looks like Sumitomo Densetsu Co.,Ltd. (TSE:1949) is about to go ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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 as the process of settlement involves at least 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 Sumitomo DensetsuLtd's shares before the 28th of March in order to be eligible for the dividend, which will be paid on the 26th of June.

The company's next dividend payment will be JP¥60.00 per share. Last year, in total, the company distributed JP¥120 to shareholders. Based on the last year's worth of payments, Sumitomo DensetsuLtd has a trailing yield of 2.4% on the current stock price of JP¥5090.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sumitomo DensetsuLtd paid out a comfortable 33% of its profit last year. 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. It distributed 45% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Sumitomo DensetsuLtd'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.

View our latest analysis for Sumitomo DensetsuLtd

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

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Sumitomo DensetsuLtd's earnings per share have been growing at 19% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sumitomo DensetsuLtd has delivered 17% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Sumitomo DensetsuLtd an attractive dividend stock, or better left on the shelf? We love that Sumitomo DensetsuLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Sumitomo DensetsuLtd, and we would prioritise taking a closer look at it.

So while Sumitomo DensetsuLtd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Sumitomo DensetsuLtd you should be aware of.

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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.