Senshu Electric Co.,Ltd. (TSE:9824) Passed Our Checks, And It's About To Pay A JP¥65.00 Dividend

It looks like Senshu Electric Co.,Ltd. (TSE:9824) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Senshu ElectricLtd investors that purchase the stock on or after the 30th of October will not receive the dividend, which will be paid on the 29th of January.

The company's upcoming dividend is JP¥65.00 a share, following on from the last 12 months, when the company distributed a total of JP¥130 per share to shareholders. Calculating the last year's worth of payments shows that Senshu ElectricLtd has a trailing yield of 2.8% on the current share price of JP¥4650.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Senshu ElectricLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Senshu ElectricLtd

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. Senshu ElectricLtd paid out a comfortable 32% of its profit last year. A useful secondary check can be to evaluate whether Senshu ElectricLtd generated enough free cash flow to afford its dividend. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Senshu ElectricLtd 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 it's comforting to see Senshu ElectricLtd's earnings have been skyrocketing, up 27% per annum for the past five years. Senshu ElectricLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Senshu ElectricLtd has delivered 23% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Senshu ElectricLtd an attractive dividend stock, or better left on the shelf? Senshu ElectricLtd has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

Want to learn more about Senshu ElectricLtd's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.