We Wouldn't Be Too Quick To Buy Wise Holdings Co.,Ltd. (TSE:5955) Before It Goes Ex-Dividend

Readers hoping to buy Wise Holdings Co.,Ltd. (TSE:5955) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days 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 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 Wise HoldingsLtd's shares before the 28th of March to receive the dividend, which will be paid on the 9th of June.

The company's next dividend payment will be JP¥1.00 per share, on the back of last year when the company paid a total of JP¥1.00 to shareholders. Looking at the last 12 months of distributions, Wise HoldingsLtd has a trailing yield of approximately 1.2% on its current stock price of JP¥81.00. If you buy this business for its dividend, you should have an idea of whether Wise HoldingsLtd's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wise HoldingsLtd paid out 50% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 97% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Wise HoldingsLtd paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Wise HoldingsLtd's ability to maintain its dividend.

Check out our latest analysis for Wise HoldingsLtd

Click here to see how much of its profit Wise HoldingsLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Wise HoldingsLtd's earnings per share have fallen at approximately 5.2% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wise HoldingsLtd's dividend payments are broadly unchanged compared to where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

To Sum It Up

Should investors buy Wise HoldingsLtd for the upcoming dividend? Wise HoldingsLtd had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Wise HoldingsLtd.

With that being said, if you're still considering Wise HoldingsLtd as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 3 warning signs for Wise HoldingsLtd (of which 1 is significant!) you should know about.

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.