Kurogane Kosakusho Ltd. (TSE:7997) Passed Our Checks, And It's About To Pay A JP¥40.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kurogane Kosakusho Ltd. (TSE:7997) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days 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. Accordingly, Kurogane Kosakusho investors that purchase the stock on or after the 27th of November will not receive the dividend, which will be paid on the 2nd of March.

The company's next dividend payment will be JP¥40.00 per share, on the back of last year when the company paid a total of JP¥20.00 to shareholders. Looking at the last 12 months of distributions, Kurogane Kosakusho has a trailing yield of approximately 1.8% on its current stock price of JP¥1133.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Kurogane Kosakusho has a low and conservative payout ratio of just 11% of its income after tax.

Check out our latest analysis for Kurogane Kosakusho

Click here to see how much of its profit Kurogane Kosakusho 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Kurogane Kosakusho has grown its earnings rapidly, up 56% a year for the past five years. Kurogane Kosakusho earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kurogane Kosakusho's dividend payments per share have declined at 7.4% per year on average over the past nine years, which is uninspiring. Kurogane Kosakusho is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Kurogane Kosakusho an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Kurogane Kosakusho appears to have some promise as a dividend stock, and we'd suggest 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. Every company has risks, and we've spotted 5 warning signs for Kurogane Kosakusho you should know about.

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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.