Only Three Days Left To Cash In On Coach A's (TSE:9339) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Coach A Co., Ltd. (TSE:9339) is about to trade ex-dividend in the next three 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Coach A's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 31st of March.

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. Based on the last year's worth of payments, Coach A has a trailing yield of 1.4% on the current stock price of JP¥1481.00. 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 Coach A

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. An unusually high payout ratio of 245% of its profit suggests something is happening other than the usual distribution of profits to shareholders. 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. Luckily it paid out just 13% of its free cash flow last year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Coach A fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Coach A paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Coach A's earnings have been skyrocketing, up 22% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Coach A dividends are largely the same as they were two years ago.

The Bottom Line

Should investors buy Coach A for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Coach A is paying out so much of its profit. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Coach A is facing. Our analysis shows 3 warning signs for Coach A and you should be aware of them before buying any shares.

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.