Why You Might Be Interested In Eternal Hospitality Group Co.,Ltd. (TSE:3193) For Its Upcoming Dividend

Readers hoping to buy Eternal Hospitality Group Co.,Ltd. (TSE:3193) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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, Eternal Hospitality GroupLtd investors that purchase the stock on or after the 30th of July will not receive the dividend, which will be paid on the 30th of October.

The company's next dividend payment will be JP¥23.00 per share, on the back of last year when the company paid a total of JP¥46.00 to shareholders. Calculating the last year's worth of payments shows that Eternal Hospitality GroupLtd has a trailing yield of 1.5% on the current share price of JP¥3160.00. 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! As a result, readers should always check whether Eternal Hospitality GroupLtd has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Eternal Hospitality GroupLtd's payout ratio is modest, at just 35% 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 paid out 16% of its free cash flow as dividends last year, which is conservatively low.

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.

See our latest analysis for Eternal Hospitality GroupLtd

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Eternal Hospitality GroupLtd's earnings have been skyrocketing, up 38% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Eternal Hospitality GroupLtd has delivered an average of 79% per year annual increase in its dividend, based on the past three years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy Eternal Hospitality GroupLtd for the upcoming dividend? 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. Overall we think this is an attractive combination and worthy of further research.

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

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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.