There's A Lot To Like About Create SD Holdings' (TSE:3148) Upcoming JP¥34.00 Dividend

Create SD Holdings Co., Ltd. (TSE:3148) is about to trade ex-dividend in the next four days. The ex-dividend date generally occurs two days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Create SD Holdings' shares on or after the 29th of May will not receive the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be JP¥34.00 per share. Last year, in total, the company distributed JP¥68.00 to shareholders. Last year's total dividend payments show that Create SD Holdings has a trailing yield of 2.2% on the current share price of JP¥3130.00. If you buy this business for its dividend, you should have an idea of whether Create SD Holdings's dividend is reliable and sustainable. So we need to investigate whether Create SD Holdings can afford its dividend, and if the dividend could grow.

We've discovered 1 warning sign about Create SD Holdings. View them for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Create SD Holdings's payout ratio is modest, at just 32% of profit. 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 distributed 40% of its free cash flow as dividends, a comfortable payout level 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.

Check out our latest analysis for Create SD Holdings

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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Create SD Holdings, with earnings per share up 7.4% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

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, Create SD Holdings has lifted its dividend by approximately 13% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Create SD Holdings for the upcoming dividend? Earnings per share growth has been growing somewhat, and Create SD 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 Create SD Holdings is halfway there. Create SD Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Create SD Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Create SD Holdings and you should be aware of this before buying any shares.

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.

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.