Kyoshin Co., Ltd. (TSE:4735) Goes Ex-Dividend Soon

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 Kyoshin Co., Ltd. (TSE:4735) is about to go ex-dividend in just three 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Kyoshin's shares before the 29th of May in order to receive the dividend, which the company will pay on the 25th of August.

The company's next dividend payment will be JP¥7.71 per share, on the back of last year when the company paid a total of JP¥7.71 to shareholders. Based on the last year's worth of payments, Kyoshin stock has a trailing yield of around 2.2% on the current share price of JP¥353.00. If you buy this business for its dividend, you should have an idea of whether Kyoshin's dividend is reliable and sustainable. As a result, readers should always check whether Kyoshin has been able to grow its dividends, or if the dividend might be cut.

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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. Kyoshin is paying out an acceptable 68% of its profit, a common payout level among most companies. 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 3.8% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Kyoshin'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 Kyoshin

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Kyoshin's earnings per share have dropped 14% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Kyoshin has increased its dividend at approximately 1.0% a year on average.

To Sum It Up

Is Kyoshin worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into Kyoshin, it's worth knowing the risks this business faces. To that end, you should learn about the 5 warning signs we've spotted with Kyoshin (including 2 which can't be ignored).

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.