Should You Buy Sportsfield Co., Ltd. (TSE:7080) For Its Upcoming Dividend?

Readers hoping to buy Sportsfield Co., Ltd. (TSE:7080) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Sportsfield's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 28th of March.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥16.00 to shareholders. Based on the last year's worth of payments, Sportsfield has a trailing yield of 2.8% on the current stock price of JP¥573.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Sportsfield

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Sportsfield is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Click here to see how much of its profit Sportsfield 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. It's encouraging to see Sportsfield has grown its earnings rapidly, up 48% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Sportsfield looks like a promising growth company.

Unfortunately Sportsfield has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is Sportsfield worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Sportsfield ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

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 1 warning sign with Sportsfield 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.