ROYAL HOLDINGS Co., Ltd. (TSE:8179) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ROYAL HOLDINGS Co., Ltd. (TSE:8179) is about to trade ex-dividend in the next 3 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, ROYAL HOLDINGS investors that purchase the stock on or after the 27th of December will not receive the dividend, which will be paid on the 28th of March.

The company's next dividend payment will be JP¥28.00 per share. Last year, in total, the company distributed JP¥28.00 to shareholders. Looking at the last 12 months of distributions, ROYAL HOLDINGS has a trailing yield of approximately 1.2% on its current stock price of JP¥2399.00. If you buy this business for its dividend, you should have an idea of whether ROYAL HOLDINGS's dividend is reliable and sustainable. As a result, readers should always check whether ROYAL HOLDINGS has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for ROYAL HOLDINGS

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ROYAL HOLDINGS has a low and conservative payout ratio of just 19% of its income after tax. A useful secondary check can be to evaluate whether ROYAL HOLDINGS generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

It's positive to see that ROYAL HOLDINGS'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. With that in mind, we're encouraged by the steady growth at ROYAL HOLDINGS, with earnings per share up 7.9% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ROYAL HOLDINGS has delivered 7.2% dividend growth per year on average over the past 10 years. 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

Has ROYAL HOLDINGS got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and ROYAL HOLDINGS 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 ROYAL HOLDINGS is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about ROYAL HOLDINGS, and we would prioritise taking a closer look at it.

Wondering what the future holds for ROYAL HOLDINGS? 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.

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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.