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

Sumitomo Densetsu Co.,Ltd. (TSE:1949) stock is about to trade ex-dividend in 3 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. Thus, you can purchase Sumitomo DensetsuLtd's shares before the 27th of September in order to receive the dividend, which the company will pay on the 4th of December.

The company's upcoming dividend is JP¥57.00 a share, following on from the last 12 months, when the company distributed a total of JP¥114 per share to shareholders. Based on the last year's worth of payments, Sumitomo DensetsuLtd has a trailing yield of 2.8% on the current stock price of JP¥4135.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Sumitomo DensetsuLtd can afford its dividend, and if the dividend could grow.

See our latest analysis for Sumitomo DensetsuLtd

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 34% 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. Over the last year it paid out 63% of its free cash flow as dividends, within the usual range for most companies.

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.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Sumitomo DensetsuLtd's earnings per share have risen 16% per annum over the last five years. Sumitomo DensetsuLtd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sumitomo DensetsuLtd has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Sumitomo DensetsuLtd worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Sumitomo DensetsuLtd paid out less than half its earnings and a bit over half its free cash flow. Sumitomo DensetsuLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Sumitomo DensetsuLtd you should be aware of.

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.