Is It Smart To Buy Eternal Hospitality Group Co.,Ltd. (TSE:3193) Before It Goes Ex-Dividend?

Eternal Hospitality Group Co.,Ltd. (TSE:3193) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Eternal Hospitality GroupLtd's shares before the 30th of January to receive the dividend, which will be paid on the 7th of April.

The company's upcoming dividend is JP¥23.00 a share, following on from the last 12 months, when the company distributed a total of JP¥46.00 per share to shareholders. Calculating the last year's worth of payments shows that Eternal Hospitality GroupLtd has a trailing yield of 1.6% on the current share price of JP¥2791.00. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Eternal Hospitality GroupLtd

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. Eternal Hospitality GroupLtd paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 5.0% of its cash flow last year.

It's positive to see that Eternal Hospitality GroupLtd'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 the company's payout ratio, plus analyst estimates of its future dividends.

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. It's encouraging to see Eternal Hospitality GroupLtd has grown its earnings rapidly, up 47% a year for the past five years. Eternal Hospitality GroupLtd earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last two years, Eternal Hospitality GroupLtd has lifted its dividend by approximately 140% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Eternal Hospitality GroupLtd an attractive dividend stock, or better left on the shelf? We love that Eternal Hospitality GroupLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Eternal Hospitality GroupLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Eternal Hospitality GroupLtd? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.