Is It Worth Considering Seiwa Chuo Holdings Corporation (TSE:7531) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Seiwa Chuo Holdings Corporation (TSE:7531) 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 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 Seiwa Chuo Holdings' shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 29th of March.

The company's next dividend payment will be JP¥10.00 per share. Last year, in total, the company distributed JP¥15.00 to shareholders. Looking at the last 12 months of distributions, Seiwa Chuo Holdings has a trailing yield of approximately 1.2% on its current stock price of JP¥1268.00. 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 Seiwa Chuo Holdings can afford its dividend, and if the dividend could grow.

View our latest analysis for Seiwa Chuo Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Seiwa Chuo Holdings paid out more than half (75%) of its earnings last year, which is a regular payout ratio for most companies. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 6.9% of its cash flow last year.

It's positive to see that Seiwa Chuo Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Seiwa Chuo Holdings 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 fall far enough, the company could be forced to cut its dividend. Seiwa Chuo Holdings's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 38% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Seiwa Chuo Holdings's dividend payments per share have declined at 2.8% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Seiwa Chuo Holdings an attractive dividend stock, or better left on the shelf? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, it's hard to get excited about Seiwa Chuo Holdings from a dividend perspective.

However if you're still interested in Seiwa Chuo Holdings as a potential investment, you should definitely consider some of the risks involved with Seiwa Chuo Holdings. To that end, you should learn about the 4 warning signs we've spotted with Seiwa Chuo Holdings (including 2 which are significant).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.