Is It Smart To Buy Kpp Group Holdings Co., Ltd. (TSE:9274) Before It Goes Ex-Dividend?

Kpp Group Holdings Co., Ltd. (TSE:9274) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least 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 Kpp Group Holdings' shares before the 28th of March in order to receive the dividend, which the company will pay on the 30th of June.

The company's next dividend payment will be JP¥18.00 per share, on the back of last year when the company paid a total of JP¥32.00 to shareholders. Calculating the last year's worth of payments shows that Kpp Group Holdings has a trailing yield of 5.2% on the current share price of JP¥689.00. If you buy this business for its dividend, you should have an idea of whether Kpp Group Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Kpp Group Holdings has a low and conservative payout ratio of just 15% of its income after tax. 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. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

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.

See our latest analysis for Kpp Group Holdings

Click here to see how much of its profit Kpp Group Holdings 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. That's why it's comforting to see Kpp Group Holdings's earnings have been skyrocketing, up 33% per annum for the past five years. Kpp Group Holdings 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.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kpp Group Holdings has delivered 24% dividend growth per year on average over the past six years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Kpp Group Holdings for the upcoming dividend? Kpp Group Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Kpp Group Holdings, and we would prioritise taking a closer look at it.

While it's tempting to invest in Kpp Group Holdings for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Kpp Group Holdings (including 1 which makes us a bit uncomfortable).

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.