IK HOLDINGS Co.,Ltd. (TSE:2722) Is About To Go Ex-Dividend, And It Pays A 2.1% Yield

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 IK HOLDINGS Co.,Ltd. (TSE:2722) is about to go ex-dividend in just four days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least 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 IK HOLDINGSLtd's shares before the 29th of May to receive the dividend, which will be paid on the 26th of August.

The company's upcoming dividend is JP¥8.00 a share, following on from the last 12 months, when the company distributed a total of JP¥8.00 per share to shareholders. Calculating the last year's worth of payments shows that IK HOLDINGSLtd has a trailing yield of 2.1% on the current share price of JP¥386.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether IK HOLDINGSLtd can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. IK HOLDINGSLtd paid out just 8.7% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether IK HOLDINGSLtd generated enough free cash flow to afford its dividend. IK HOLDINGSLtd paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Check out our latest analysis for IK HOLDINGSLtd

Click here to see how much of its profit IK HOLDINGSLtd 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. For this reason, we're glad to see IK HOLDINGSLtd's earnings per share have risen 13% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. IK HOLDINGSLtd has delivered an average of 5.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

The Bottom Line

Should investors buy IK HOLDINGSLtd for the upcoming dividend? We like that IK HOLDINGSLtd has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that IK HOLDINGSLtd is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.