Kyoritsu Maintenance Co., Ltd. (TSE:9616) Is About To Go Ex-Dividend, And It Pays A 1.4% Yield

Kyoritsu Maintenance Co., Ltd. (TSE:9616) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Kyoritsu Maintenance investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be JP¥16.00 per share. Last year, in total, the company distributed JP¥32.00 to shareholders. Looking at the last 12 months of distributions, Kyoritsu Maintenance has a trailing yield of approximately 1.4% on its current stock price of JP¥2298.50. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Kyoritsu Maintenance

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kyoritsu Maintenance is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out an unsustainably high 202% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Kyoritsu Maintenance intends to continue funding this dividend, or if it could be forced to cut the payment.

While Kyoritsu Maintenance's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Kyoritsu Maintenance to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Kyoritsu Maintenance earnings per share are up 6.9% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kyoritsu Maintenance has delivered 14% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Kyoritsu Maintenance an attractive dividend stock, or better left on the shelf? Kyoritsu Maintenance delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 202% of its cash flow over the last year, which is a mediocre outcome. To summarise, Kyoritsu Maintenance looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Kyoritsu Maintenance, it's worth knowing the risks this business faces. To help with this, we've discovered 1 warning sign for Kyoritsu Maintenance that you should be aware of before investing in their shares.

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.