Just Four Days Till Pegasus Co., Ltd. (TSE:6262) Will Be Trading Ex-Dividend

Pegasus Co., Ltd. (TSE:6262) is about to trade ex-dividend in the next 4 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Pegasus' shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 1st of January.

The company's next dividend payment will be JP¥8.00 per share, on the back of last year when the company paid a total of JP¥16.00 to shareholders. Last year's total dividend payments show that Pegasus has a trailing yield of 3.1% on the current share price of JP¥517.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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. Pegasus has a low and conservative payout ratio of just 12% of its income after tax. A useful secondary check can be to evaluate whether Pegasus generated enough free cash flow to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level 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.

View our latest analysis for Pegasus

Click here to see how much of its profit Pegasus 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Pegasus's earnings per share have fallen at approximately 13% 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. Pegasus has delivered 7.2% dividend growth per year on average over the past 10 years.

Final Takeaway

Should investors buy Pegasus for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Pegasus from a dividend perspective.

On that note, you'll want to research what risks Pegasus is facing. Our analysis shows 2 warning signs for Pegasus 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.