Be Sure To Check Out Peers Co.,Ltd. (TSE:7066) Before It Goes Ex-Dividend

Readers hoping to buy Peers Co.,Ltd. (TSE:7066) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase PeersLtd's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 25th of December.

The company's next dividend payment will be JP¥12.76 per share, on the back of last year when the company paid a total of JP¥12.76 to shareholders. Based on the last year's worth of payments, PeersLtd has a trailing yield of 1.4% on the current stock price of JP¥881.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for PeersLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PeersLtd paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether PeersLtd generated enough free cash flow to afford its dividend. It paid out 1.8% of its free cash flow as dividends last year, which is conservatively low.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at PeersLtd, with earnings per share up 2.1% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last four years, PeersLtd has lifted its dividend by approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy PeersLtd for the upcoming dividend? Earnings per share growth has been growing somewhat, and PeersLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and PeersLtd is halfway there. There's a lot to like about PeersLtd, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 3 warning signs with PeersLtd and understanding them should be part of your investment process.

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.