Is It Worth Considering Heian Ceremony Service Co.,Ltd. (TSE:2344) For Its Upcoming Dividend?

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 Heian Ceremony Service Co.,Ltd. (TSE:2344) is about to go ex-dividend in just 3 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 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 Heian Ceremony ServiceLtd's shares before the 29th of September to receive the dividend, which will be paid on the 8th of December.

The company's upcoming dividend is JP¥18.00 a share, following on from the last 12 months, when the company distributed a total of JP¥36.00 per share to shareholders. Looking at the last 12 months of distributions, Heian Ceremony ServiceLtd has a trailing yield of approximately 3.6% on its current stock price of JP¥1007.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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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. Heian Ceremony ServiceLtd paid out a comfortable 28% of its profit last year. 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. Over the last year it paid out 65% of its free cash flow as dividends, within the usual range for most companies.

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 Heian Ceremony ServiceLtd

Click here to see how much of its profit Heian Ceremony ServiceLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Heian Ceremony ServiceLtd earnings per share are up 6.3% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. 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. In the last 10 years, Heian Ceremony ServiceLtd has lifted its dividend by approximately 6.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Heian Ceremony ServiceLtd for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that Heian Ceremony ServiceLtd is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about Heian Ceremony ServiceLtd from a dividend perspective.

On that note, you'll want to research what risks Heian Ceremony ServiceLtd is facing. Case in point: We've spotted 1 warning sign for Heian Ceremony ServiceLtd you should be aware of.

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.