First Juken Co., Ltd. (TSE:8917) Passed Our Checks, And It's About To Pay A JP¥21.00 Dividend

First Juken Co., Ltd. (TSE:8917) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase First Juken's shares before the 28th of April in order to be eligible for the dividend, which will be paid on the 22nd of July.

The company's next dividend payment will be JP¥21.00 per share, on the back of last year when the company paid a total of JP¥43.00 to shareholders. Looking at the last 12 months of distributions, First Juken has a trailing yield of approximately 4.1% on its current stock price of JP¥1049.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've discovered 2 warning signs about First Juken. View them for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First Juken has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether First Juken generated enough free cash flow to afford its dividend. The good news is it paid out just 13% of its free cash flow in the last year.

It's positive to see that First Juken'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.

See our latest analysis for First Juken

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about First Juken's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the First Juken dividends are largely the same as they were seven years ago.

Final Takeaway

Has First Juken got what it takes to maintain its dividend payments? Earnings per share have been flat over this time, but we're intrigued to see that First Juken 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 strong earnings per share growth with a low payout ratio, and First Juken is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in First Juken for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for First Juken (1 is a bit unpleasant!) that deserve your attention before investing in the 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.