Qol Holdings Co., Ltd. (TSE:3034) Passed Our Checks, And It's About To Pay A JP¥17.00 Dividend

Qol Holdings Co., Ltd. (TSE:3034) stock is about to trade ex-dividend in 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Qol Holdings investors that purchase the stock on or after the 28th of March will not receive the dividend, which will be paid on the 12th of June.

The company's upcoming dividend is JP¥17.00 a share, following on from the last 12 months, when the company distributed a total of JP¥34.00 per share to shareholders. Looking at the last 12 months of distributions, Qol Holdings has a trailing yield of approximately 2.1% on its current stock price of JP¥1628.00. If you buy this business for its dividend, you should have an idea of whether Qol Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Qol Holdings has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Qol Holdings paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out 23% 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.

See our latest analysis for Qol Holdings

Click here to see how much of its profit Qol Holdings 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 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 Qol Holdings earnings per share are up 4.0% per annum over the last five years. Qol Holdings is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Qol Holdings has delivered 6.6% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Qol Holdings got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Qol Holdings 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 significant earnings per share growth with a low payout ratio, and Qol Holdings is halfway there. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Qol Holdings and you should be aware of it before buying any 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.