Only Four Days Left To Cash In On Sanki Service's (TSE:6044) Dividend

Sanki Service Corporation (TSE:6044) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Sanki Service investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 28th of August.

The company's next dividend payment will be JP¥20.00 per share, and in the last 12 months, the company paid a total of JP¥20.00 per share. Last year's total dividend payments show that Sanki Service has a trailing yield of 1.6% on the current share price of JP¥1253.00. 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 Sanki Service has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Sanki Service

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Sanki Service paying out a modest 28% of its earnings. 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. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Sanki Service'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 Sanki Service paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Sanki Service's earnings per share have fallen at approximately 6.3% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, Sanki Service has increased its dividend at approximately 3.2% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Sanki Service? Earnings per share have fallen significantly, although at least Sanki Service paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Sanki Service, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Sanki Service you should know about.

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.