Sankyo Tateyama,Inc. (TSE:5932) Stock Goes Ex-Dividend In Just Three Days

Sankyo Tateyama,Inc. (TSE:5932) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Sankyo TateyamaInc's shares on or after the 28th of November will not receive the dividend, which will be paid on the 14th of February.

The company's next dividend payment will be JP¥12.50 per share, on the back of last year when the company paid a total of JP¥25.00 to shareholders. Looking at the last 12 months of distributions, Sankyo TateyamaInc has a trailing yield of approximately 3.5% on its current stock price of JP¥721.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Sankyo TateyamaInc

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. Sankyo TateyamaInc's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 7.4% of its cash flow last year.

Click here to see how much of its profit Sankyo TateyamaInc 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 fall far enough, the company could be forced to cut its dividend. Sankyo TateyamaInc was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Sankyo TateyamaInc has lifted its dividend by approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Sankyo TateyamaInc is keeping back more of its profits to grow the business.

Remember, you can always get a snapshot of Sankyo TateyamaInc's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Sankyo TateyamaInc worth buying for its dividend? It's hard to get used to Sankyo TateyamaInc paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. 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 in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Sankyo TateyamaInc and you should be aware of these before buying any shares.

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.