There's A Lot To Like About Glory's (TSE:6457) Upcoming JP¥54.00 Dividend

Readers hoping to buy Glory Ltd. (TSE:6457) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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 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 Glory's shares before the 27th of September in order to receive the dividend, which the company will pay on the 5th of December.

The company's upcoming dividend is JP¥54.00 a share, following on from the last 12 months, when the company distributed a total of JP¥108 per share to shareholders. Looking at the last 12 months of distributions, Glory has a trailing yield of approximately 4.2% on its current stock price of JP¥2599.50. 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! So we need to investigate whether Glory can afford its dividend, and if the dividend could grow.

See our latest analysis for Glory

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Glory paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 12% of its free cash flow last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Glory's earnings have been skyrocketing, up 25% per annum for the past five years. Glory earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Glory has delivered an average of 9.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Glory worth buying for its dividend? It's great that Glory is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Glory looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Glory is facing. Be aware that Glory is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...

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.