Create SD Holdings Co., Ltd. (TSE:3148) Goes Ex-Dividend Soon

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 Create SD Holdings Co., Ltd. (TSE:3148) is about to go ex-dividend in just three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves 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 Create SD Holdings' shares before the 28th of November to receive the dividend, which will be paid on the 5th of February.

The company's next dividend payment will be JP¥34.00 per share, on the back of last year when the company paid a total of JP¥68.00 to shareholders. Based on the last year's worth of payments, Create SD Holdings has a trailing yield of 2.4% on the current stock price of JP¥2877.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Create SD Holdings

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. Create SD Holdings paid out a comfortable 30% 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. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Create SD Holdings'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.

Click here to see how much of its profit Create SD 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Create SD Holdings, with earnings per share up 6.8% on average over the last five years. Decent historical earnings per share growth suggests Create SD Holdings has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Create SD Holdings has delivered 13% 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

Should investors buy Create SD Holdings for the upcoming dividend? Earnings per share have been growing at a steady rate, and Create SD Holdings paid out less than half its profits and more than half its free cash flow as dividends over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Create SD Holdings's dividend merits.

So while Create SD Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Create SD Holdings that we recommend you consider before investing in the business.

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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.