SAN-A CO.,LTD. (TSE:2659) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that SAN-A CO.,LTD. (TSE:2659) is about to go ex-dividend in just three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase SAN-ALTD's shares on or after the 27th of February, you won't be eligible to receive the dividend, when it is paid on the 29th of May.

The company's next dividend payment will be JP¥80.00 per share, and in the last 12 months, the company paid a total of JP¥55.00 per share. Looking at the last 12 months of distributions, SAN-ALTD has a trailing yield of approximately 1.9% on its current stock price of JP¥2961.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for SAN-ALTD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SAN-ALTD paid out a comfortable 31% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 9.0% of its free cash flow in the last year.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see SAN-ALTD earnings per share are up 3.8% per annum over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SAN-ALTD has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy SAN-ALTD for the upcoming dividend? Earnings per share have been growing moderately, and SAN-ALTD is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but SAN-ALTD is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

Ever wonder what the future holds for SAN-ALTD? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.