Rix Corporation (TSE:7525) Pays A JP¥64.00 Dividend In Just Three Days

Rix Corporation (TSE:7525) is about to trade ex-dividend in the next 3 days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Rix's shares before the 29th of September in order to be eligible for the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be JP¥64.00 per share. Last year, in total, the company distributed JP¥146 to shareholders. Based on the last year's worth of payments, Rix stock has a trailing yield of around 4.3% on the current share price of JP¥3430.00. If you buy this business for its dividend, you should have an idea of whether Rix's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Fortunately Rix's payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether Rix generated enough free cash flow to afford its dividend. It paid out 90% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Rix paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Rix to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for Rix

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

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Rix, with earnings per share up 8.9% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

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, Rix has lifted its dividend by approximately 20% a year on average. 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 Rix worth buying for its dividend? Rix delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 90% of its cash flow over the last year, which is a mediocre outcome. All things considered, we are not particularly enthused about Rix from a dividend perspective.

If you're not too concerned about Rix's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Rix has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.