Be Sure To Check Out ITOCHU-SHOKUHIN Co., Ltd. (TSE:2692) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ITOCHU-SHOKUHIN Co., Ltd. (TSE:2692) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, ITOCHU-SHOKUHIN investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 27th of November.

The company's next dividend payment will be JP¥60.00 per share. Last year, in total, the company distributed JP¥120 to shareholders. Based on the last year's worth of payments, ITOCHU-SHOKUHIN has a trailing yield of 1.6% on the current stock price of JP¥7400.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for ITOCHU-SHOKUHIN

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. ITOCHU-SHOKUHIN has a low and conservative payout ratio of just 21% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 13% 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 how much of its profit ITOCHU-SHOKUHIN 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, ITOCHU-SHOKUHIN's earnings per share have been growing at 15% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, ITOCHU-SHOKUHIN has lifted its dividend by approximately 5.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is ITOCHU-SHOKUHIN an attractive dividend stock, or better left on the shelf? ITOCHU-SHOKUHIN has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

Want to learn more about ITOCHU-SHOKUHIN's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.