Kpp Group Holdings Co., Ltd. (TSE:9274) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Kpp Group Holdings Co., Ltd. (TSE:9274) is about to go ex-dividend in the next 2 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Kpp Group Holdings' shares before the 29th of September to receive the dividend, which will be paid on the 3rd of December.

The company's next dividend payment will be JP¥18.00 per share. Last year, in total, the company distributed JP¥36.00 to shareholders. Based on the last year's worth of payments, Kpp Group Holdings stock has a trailing yield of around 4.5% on the current share price of JP¥808.00. 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.

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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 Kpp Group Holdings's payout ratio is modest, at just 25% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 29% 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.

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 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 Kpp Group Holdings's earnings have been skyrocketing, up 47% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, seven years ago, Kpp Group Holdings has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kpp Group Holdings? 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 seven 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. We've identified 3 warning signs with Kpp Group Holdings (at least 1 which is concerning), and understanding them should be part of your investment process.

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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.