Komatsu Wall Industry (TSE:7949) Could Be A Buy For Its Upcoming Dividend

Komatsu Wall Industry Co., Ltd. (TSE:7949) stock is about to trade ex-dividend in 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 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. Accordingly, Komatsu Wall Industry investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 27th of November.

The company's upcoming dividend is JP¥60.00 a share, following on from the last 12 months, when the company distributed a total of JP¥130 per share to shareholders. Based on the last year's worth of payments, Komatsu Wall Industry stock has a trailing yield of around 4.3% on the current share price of JP¥3035.00. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Komatsu Wall Industry

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Komatsu Wall Industry paid out a comfortable 45% of its profit last year. 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. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.

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 how much of its profit Komatsu Wall Industry paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why we're glad to see earnings per share up 9.7% over the past 12 months. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

Given that Komatsu Wall Industry has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Is Komatsu Wall Industry worth buying for its dividend? Earnings per share have been growing moderately, and Komatsu Wall Industry is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Komatsu Wall Industry is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for Komatsu Wall Industry that we recommend you consider before investing in the business.

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.