Is It Smart To Buy Ichishin Holdings Co.,Ltd. (TSE:4645) Before It Goes Ex-Dividend?

It looks like Ichishin Holdings Co.,Ltd. (TSE:4645) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Ichishin HoldingsLtd's shares on or after the 27th of February will not receive the dividend, which will be paid on the 16th of May.

The company's upcoming dividend is JP¥10.00 a share, following on from the last 12 months, when the company distributed a total of JP¥10.00 per share to shareholders. Looking at the last 12 months of distributions, Ichishin HoldingsLtd has a trailing yield of approximately 2.2% on its current stock price of JP¥462.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Ichishin HoldingsLtd

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 Ichishin HoldingsLtd's payout ratio is modest, at just 31% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.

It's positive to see that Ichishin HoldingsLtd'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 Ichishin HoldingsLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Ichishin HoldingsLtd, with earnings per share up 3.2% on average over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Ichishin HoldingsLtd dividends are largely the same as they were 10 years ago.

Final Takeaway

From a dividend perspective, should investors buy or avoid Ichishin HoldingsLtd? Earnings per share growth has been growing somewhat, and Ichishin HoldingsLtd 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. It might be nice to see earnings growing faster, but Ichishin HoldingsLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Ichishin HoldingsLtd for the dividends alone, you should always be mindful of the risks involved. We've identified 4 warning signs with Ichishin HoldingsLtd (at least 1 which can't be ignored), and understanding these should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.