There's A Lot To Like About Sega Sammy Holdings' (TSE:6460) Upcoming JP¥25.00 Dividend

It looks like Sega Sammy Holdings Inc. (TSE:6460) is about to go ex-dividend in the next 3 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Sega Sammy Holdings' shares before the 27th of September to receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥25.00 per share, and in the last 12 months, the company paid a total of JP¥50.00 per share. Based on the last year's worth of payments, Sega Sammy Holdings has a trailing yield of 1.7% on the current stock price of JP¥2939.50. If you buy this business for its dividend, you should have an idea of whether Sega Sammy Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Sega Sammy Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Sega Sammy Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sega Sammy Holdings paid out a comfortable 27% of its profit last year. 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. It paid out 25% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Sega Sammy Holdings's earnings have been skyrocketing, up 75% per annum for the past five years. Sega Sammy Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Sega Sammy Holdings has lifted its dividend by approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Sega Sammy Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Is Sega Sammy Holdings an attractive dividend stock, or better left on the shelf? It's great that Sega Sammy Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Sega Sammy Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Sega Sammy Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Sega Sammy Holdings that you should be aware of before investing in their shares.

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.